How Do We Figure Out Optimal Liquidity Regulation?

Douglas W. Diamond and Anil Kashyap

Chapter 12 in Achieving Financial Stability:Challenges to Prudential Regulation, 2017, pp 159-171 from World Scientific Publishing Co. Pte. Ltd.

Abstract: There is little agreement on regulatory goals for bank liquid asset holdings and no benchmark theory on the issue, despite recent regulation in this area. Economists even have competing concepts in mind when discussing liquidity, resulting in no generally accepted empirical measure. Allen (2014), in a literature survey, concludes: “With capital regulation there is a huge literature but little agreement on the optimal level of requirements. With liquidity regulation, we do not even know what to argue about”…

Keywords: Money and Banking; International Banking; Financial Instititions; Banks; Regulations; Compliance; Financial Crisis; Great Financial Crisis 2008; Microprudential; Macroprudential; Financial Stability (search for similar items in EconPapers)
JEL-codes: E50 (search for similar items in EconPapers)
Date: 2017
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