Capital Regulation in a Macroeconomic Model with Three Layers of Default

• Laurent Clerc ^[1] ; Alexis Derviz ^[2] ; Caterina Mendicino ^[3] ; Stéphane Moyen ^[4] ; Kalin Nikolov ^[5] ; Livio Stracca ^[5] ; Javier Suarez ^[6] ; Alexandros P. Vardoulakis ^[7]
  1. [1] Banque de France
  2. [2] Czech National Bank
  3. [3] Banco de Portugal
  4. [4] Deutsch Bundesbank
  5. [5] European Central Bank
  6. [6] CEMFI
  7. [7] Board of Governors of the Federal Reserve System

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• Localización: Documentos de Trabajo ( CEMFI ), Nº. 8 (CEMFI Working Paper 1408, December 2014), 2014
• Idioma: inglés
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• Resumen

  • 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.