FINANCIAL REGULATION IN GENERAL EQUILIBRIUM
Charles A.E. Goodhart,
Anil K. Kashyap,
Dimitrios Tsomocos and
Alexandros P. Vardoulakis
Chapter 3 in Financial Regulation and Stability, 2019, pp 27-77 from Edward Elgar Publishing
Abstract:
This paper explores how different types of financial regulation could combat many of the phenomena that were observed in the financial crisis of 2007 to 2009. The primary contribution is the introduction of a model that includes both a banking system and a “shadow banking system†that each help households finance their expenditures. Households sometimes choose to default on their loans, and when they do this triggers forced selling by the shadow banks. Because the forced selling comes when net worth of potential buyers is low, the ensuing price dynamics can be described as a fire sale. The proposed framework can assess five different policy options that officials have advocated for combating defaults, credit crunches and fire sales, namely: limits on loan to value ratios, capital requirements for banks, liquidity coverage ratios for banks, dynamic loan loss provisioning for banks, and margin requirements on repurchase agreements used by shadow banks. The paper aims to develop some general intuition about the interactions between the tools and to determine whether they act as complements and substitutes.
Keywords: Economics and Finance (search for similar items in EconPapers)
Date: 2019
References: Add references at CitEc
Citations: View citations in EconPapers (4)
Downloads: (external link)
https://www.elgaronline.com/view/9781788973649.00008.xml (application/pdf)
Our link check indicates that this URL is bad, the error code is: 503 Service Temporarily Unavailable
Related works:
Working Paper: Financial Regulation in General Equilibrium (2012) 
Working Paper: Financial Regulation in General Equilibrium (2012) 
Working Paper: Financial Regulation in General Equilibrium (2012) 
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:elg:eechap:18568_3
Ordering information: This item can be ordered from
http://www.e-elgar.com
Access Statistics for this chapter
More chapters in Chapters from Edward Elgar Publishing
Bibliographic data for series maintained by Darrel McCalla ().