Capital Regulation in a Macroeconomic Model with Three Layers of Default

By Laurent Clerc, A. Derviz, Caterina Mendicino, Stéphane Moyen, Kalin Nikolov, Livio Stracca, Javier Suárez, Alexandros P. Vardoulakis. Social Science Research Network, 2014

255 citations recorded by the source corpus.

We develop a dynamic general equilibrium model for the positive and normative analysis of macroprudential policies. Optimizing financial intermediaries allocate their scarce net worth together with funds raised from saving households across two lending activities, mortgage and corporate lending. For all borrowers (households, firms, and banks) external financing takes the form of debt which is subject to default risk. This “3D model” shows the interplay between three interconnected net worth channels that cause financial amplification and the distortions due to deposit insurance. We apply it to the analysis of capital regulation.

Subfields: Economics and Econometrics, Finance

View Paper: https://www.semanticscholar.org/paper/61670f11955f9b6f75e3d61bbf1702e2742c9a65

Citations in the corpus

• Where the Risks Lie: A Survey on Systemic Risk (2017, unknown): “Clerc et al. (2015) develop a rich model to calibrate optimal capital requirements that vary over the business cycle.”
• CENTRAL BANK POLICIES AND INCOME AND WEALTH INEQUALITY: A SURVEY (2019, unknown): “The recent study by Mendicino et al. (2018) evaluates the distributional impact of bank capital requirements, extending the model of Clerc et al. (2015).”