Publication:
Bank regulation under fire sale externalities

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dc.contributor.authorKara, G. I.
dc.contributor.authorÖzsoy, Satı Mehmet
dc.contributor.departmentEconomics
dc.contributor.ozuauthorÖZSOY, Satı Mehmet
dc.date.accessioned2020-11-30T13:15:35Z
dc.date.available2020-11-30T13:15:35Z
dc.date.issued2020-06
dc.description.abstractWe examine the optimal design of and interaction between capital and liquidity regulations. Banks, not internalizing fire sale externalities, overinvest in risky assets and underinvest in liquid assets in the competitive equilibrium. Capital requirements can alleviate the inefficiency, but banks respond by decreasing their liquidity ratios. When capital requirements are the only available tool, the regulator tightens them to offset banks' lower liquidity ratios, leading to fewer risky assets and less liquidity compared with the second best. Macroprudential liquidity requirements that complement capital regulations implement the second best, improve financial stability, and allow for more investment in risky assets.en_US
dc.identifier.doi10.1093/rfs/hhz117
dc.identifier.endpage2584en_US
dc.identifier.issn0893-9454en_US
dc.identifier.issue6en_US
dc.identifier.scopus2-s2.0-85100846312
dc.identifier.startpage2554en_US
dc.identifier.urihttp://hdl.handle.net/10679/7158
dc.identifier.urihttps://doi.org/10.1093/rfs/hhz117
dc.identifier.volume33en_US
dc.identifier.wos000536040500005
dc.language.isoengen_US
dc.peerreviewedyesen_US
dc.publicationstatusPublisheden_US
dc.publisherOxford University Pressen_US
dc.relation.ispartofThe Review of Financial Studies
dc.rightsinfo:eu-repo/semantics/restrictedAccess
dc.titleBank regulation under fire sale externalitiesen_US
dc.typeReviewen_US
dspace.entity.typePublication
relation.isOrgUnitOfPublication2afe80e3-623c-4807-a57e-2ce75845ccea
relation.isOrgUnitOfPublication.latestForDiscovery2afe80e3-623c-4807-a57e-2ce75845ccea

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