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Bank regulation and supervision and its welfare implications

Mustafa Kilinc () and Bilin Neyapti ()

Economic Modelling, 2012, vol. 29, issue 2, 132-141

Abstract: This study provides a general equilibrium model to explore the welfare implications of bank regulation and supervision (RS). The model supports the basic expectations regarding the positive effects of RS on the growth rate, output, credit, investment, wages and profits; and its negative effects on the interest rate. In addition, RS is observed to lead to a convergence effect. Furthermore, it is observed that the decision of banks to monitor and charge differentiated interest rates to firms depends on the distribution of firm-specific moral hazard rates; bank monitoring increases profits as the distribution of producer type improves.

Keywords: Bank regulation and supervision; Growth (search for similar items in EconPapers)
JEL-codes: E44 G28 O16 (search for similar items in EconPapers)
Date: 2012
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