Financial regulations and bank credit to the real economy

Giampaolo Gabbi, Giulia Iori, Saqib Jafarey and James Porter

Journal of Economic Dynamics and Control, 2015, vol. 50, issue C, 117-143

Abstract: We present a new agent-based model focusing on the linkage between the interbank market and the real economy with a stylised central bank acting as lender of last resort. Using this model we address the tradeoff between stability and economic performance for different structures of the interbank market. We also explore the efficacy of recent regulatory reforms using our richer model. Our results suggest that the effects of regulatory leverage ratios on the banking sector׳s performance can vary in a complex and non-monotonic way with the state of the economy, the degree of connectivity of the interbank market and the amount of information available to market participants on bank risks.

Keywords: Financial regulation; Bank lending; Systemic risk (search for similar items in EconPapers)
JEL-codes: E32 G21 G28 (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (29)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:dyncon:v:50:y:2015:i:c:p:117-143

DOI: 10.1016/j.jedc.2014.07.002

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