{"title":"Bank runs, prudential tools and social welfare in a global game general equilibrium model","authors":"Daisuke Ikeda","doi":"10.1016/j.jfs.2024.101236","DOIUrl":null,"url":null,"abstract":"<div><p>Basel III features requirements on bank capital and liquidity along with disclosure requirements. I study these prudential tools by developing a general equilibrium model with bank runs in a global game framework, where leverage, liquidity, interest rates, and the probability of a banking crisis are all determined endogenously. With timely disclosure about bank assets, the unregulated economy has efficient liquidity but excessive leverage due to a pecuniary externality, warranting a leverage restriction. Delayed disclosure gives rise to bank risk shifting, making leverage even more excessive and liquidity insufficient, which warrants joint requirements on leverage and liquidity. Empirical predictions and policy implications are derived and discussed.</p></div>","PeriodicalId":48027,"journal":{"name":"Journal of Financial Stability","volume":"72 ","pages":"Article 101236"},"PeriodicalIF":6.1000,"publicationDate":"2024-02-06","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"0","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"Journal of Financial Stability","FirstCategoryId":"96","ListUrlMain":"https://www.sciencedirect.com/science/article/pii/S1572308924000214","RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q1","JCRName":"BUSINESS, FINANCE","Score":null,"Total":0}
引用次数: 0
Abstract
Basel III features requirements on bank capital and liquidity along with disclosure requirements. I study these prudential tools by developing a general equilibrium model with bank runs in a global game framework, where leverage, liquidity, interest rates, and the probability of a banking crisis are all determined endogenously. With timely disclosure about bank assets, the unregulated economy has efficient liquidity but excessive leverage due to a pecuniary externality, warranting a leverage restriction. Delayed disclosure gives rise to bank risk shifting, making leverage even more excessive and liquidity insufficient, which warrants joint requirements on leverage and liquidity. Empirical predictions and policy implications are derived and discussed.
期刊介绍:
The Journal of Financial Stability provides an international forum for rigorous theoretical and empirical macro and micro economic and financial analysis of the causes, management, resolution and preventions of financial crises, including banking, securities market, payments and currency crises. The primary focus is on applied research that would be useful in affecting public policy with respect to financial stability. Thus, the Journal seeks to promote interaction among researchers, policy-makers and practitioners to identify potential risks to financial stability and develop means for preventing, mitigating or managing these risks both within and across countries.