EconPapers    
Economics at your fingertips  
 

MANAGING RISK TAKING WITH INTEREST RATE POLICY AND MACROPRUDENTIAL REGULATIONS

Simona Cociuba (), Malik Shukayev and Alexander Ueberfeldt

Economic Inquiry, 2019, vol. 57, issue 2, 1056-1081

Abstract: We develop a model in which a financial intermediary's investment in risky assets—risk taking—is excessive due to limited liability and deposit insurance, and characterize the policies that implement efficient risk taking. In the calibrated model, combining interest rate policy with state‐contingent macroprudential regulations—either capital or leverage regulation, and a tax on profits—achieves efficiency. Interest rate policy mitigates excessive risk taking by altering the return and the supply of collateralizable safe assets. In contrast to commonly used capital regulation, leverage regulation has stronger effects on risk taking and calls for higher interest rates. (JEL E44, E52, G11, G18)

Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
https://doi.org/10.1111/ecin.12754

Related works:
Working Paper: Managing Risk Taking with Interest Rate Policy and Macroprudential Regulations (2016) Downloads
Working Paper: Managing Risk Taking with Interest Rate Policy and Macroprudential Regulations (2016) Downloads
Working Paper: Managing Risk Taking with Interest Rate Policy and Macroprudential Regulations (2016) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bla:ecinqu:v:57:y:2019:i:2:p:1056-1081

Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=0095-2583

Access Statistics for this article

Economic Inquiry is currently edited by Preston McAfee

More articles in Economic Inquiry from Western Economic Association International Contact information at EDIRC.
Bibliographic data for series maintained by Wiley Content Delivery ().

 
Page updated 2019-05-23
Handle: RePEc:bla:ecinqu:v:57:y:2019:i:2:p:1056-1081