Capital requirements and rational discount window borrowing

Sherrill Shaffer

No 96-4, Working Papers from Federal Reserve Bank of Philadelphia

Abstract: When banks face capital regulations and stochastic deposit supply, their decisions to borrow at the discount window will be affected by a broader range of variables than previous theoretical and empirical studies have recognized. Moreover, those decisions can respond discontinuously to changes in market parameters and to the form of rationing rule by which the discount window is administered. Risk aversion can complicate these linkages considerably, even causing some banks to prefer a positive discount rate that may exceed the actual level.

Keywords: Bank capital; Discount window (search for similar items in EconPapers)
Date: 1996
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Related works:
Journal Article: Capital Requirements and Rational Discount-Window Borrowing (1998)
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