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Bank Leverage Regulation and Macroeconomic Dynamic
Social Science Research Network
This paper assesses the merits of countercyclical bank balance sheet regulation for the stabilization of financial and economic cycles and examines its interaction with monetary policy. The framework used is a dynamic stochastic general equilibrium model with banks and bank capital, in which bank capital solves an asymmetric information problem between banks and their creditors. In this economy, the lending decisions of individual banks affect the riskiness of the whole banking sector, thoughdoi:10.2139/ssrn.1999002 fatcat:ljf3lmja75fmxabz7xkh27fgbm