Imhof, Stephan; Monnet, Cyril; Zhang, Shengxing (July 2018). The Risk-Taking Channel of Liquidity Regulations and Monetary Policy (Discussion Papers 18-15). Bern: Department of Economics
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We study the implications of liquidity regulations and monetary policy on depositmaking and risk-taking. Banks give risky loans by creating deposits that firms use to pay suppliers. Firms and banks can take more or less risk. In equilibrium, higher liquidity requirements always lower risk at the cost of lower investment. Nevertheless, a positive liquidity requirement is always optimal. Monetary conditions affect the optimal size of liquidity requirements, and the optimal size is countercyclical. It is only optimal to impose a 100% liquidity requirement when the nominal interest rate is sufficiently low.
Item Type: |
Working Paper |
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Division/Institute: |
03 Faculty of Business, Economics and Social Sciences > Department of Economics |
UniBE Contributor: |
Monnet, Cyril, Zhang, Shengxing |
Subjects: |
300 Social sciences, sociology & anthropology > 330 Economics |
Series: |
Discussion Papers |
Publisher: |
Department of Economics |
Language: |
English |
Submitter: |
Lars Tschannen |
Date Deposited: |
03 Sep 2020 08:10 |
Last Modified: |
05 Dec 2022 15:40 |
BORIS DOI: |
10.7892/boris.145865 |
URI: |
https://boris.unibe.ch/id/eprint/145865 |
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