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Capital regulation and monetary policy with fragile banks

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TLDR
In this article, the authors introduce a macro model to study the transmission of monetary policy and its interplay with bank capital regulation when banks are risky, and find that risk-based capital requirements amplify the cycle and are welfare detrimental.
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This article is published in Journal of Monetary Economics.The article was published on 2013-04-01. It has received 424 citations till now. The article focuses on the topics: Monetary base & Capital adequacy ratio.

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Credit Supply and Monetary Policy: Identifying the Bank Balance-Sheet Channel with Loan Applications

TL;DR: In this paper, the impact of monetary policy on the supply of bank credit is analyzed and the authors find that tighter monetary and worse economic conditions substantially reduce loan granting, especially from banks with lower capital or liquidity ratios.
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Macroprudential policy – a literature review

TL;DR: The recent financial crisis has highlighted the need to go beyond a purely micro approach to financial regulation and supervision and the number of policy speeches, research papers and conferences that discuss a macro perspective on financial regulation has grown considerably.
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Banking, Liquidity and Bank Runs in an Infinite-Horizon Economy

TL;DR: In this article, a variation of the macroeconomic model of banking in Gertler and Kiyotaki (2011) was developed that allows for liquidity mismatch and bank runs as in Diamond and Dybvig (1983).
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The Interaction between Capital Requirements and Monetary Policy

TL;DR: In this paper, the interaction between capital requirements and monetary policy is assessed by means of simple rules in a dynamic general equilibrium model featuring a banking sector, and the benefits of introducing capital requirements become sizeable when financial shocks, which affect the supply of loans, are important drivers of economic dynamics; the availability of capital requirements as a policy tool yields a significant gain in terms of macroeconomic stabilization.
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Financial Stability and Monetary Policy: How Closely Interlinked?

TL;DR: In this article, the authors argue that the answer will depend on three questions: (i) how effective is macro-prudential policy in maintaining financial stability, (ii) what is the effect of monetary policy on risk taking and financial stability; and (iii) the risk of financial dominance, i.e., the risk that financial stability considerations undermine the credibility of the central bank's price stability mandate.
References
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Journal ArticleDOI

On the pricing of corporate debt: the risk structure of interest rates

TL;DR: In this article, the American Finance Association Meeting, New York, December 1973, presented an abstract of a paper entitled "The Future of Finance: A Review of the State of the Art".
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Bank Runs, Deposit Insurance, and Liquidity

TL;DR: The authors showed that bank deposit contracts can provide allocations superior to those of exchange markets, offering an explanation of how banks subject to runs can attract deposits, and showed that there are circumstances when government provision of deposit insurance can produce superior contracts.
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Financial Intermediation and Delegated Monitoring

TL;DR: In this paper, the authors developed a theory of financial intermediation based on minimizing the cost of monitoring information which is useful for resolving incentive problems between borrowers and lenders, and presented a characterization of the costs of providing incentives for delegated monitoring by a financial intermediary.
Posted Content

The Financial Accelerator in a Quantitative Business Cycle Framework

TL;DR: This article developed a dynamic general equilibrium model that is intended to help clarify the role of credit market frictions in business fluctuations, from both a qualitative and a quantitative standpoint, and the model is a synthesis of the leading approaches in the literature.
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The Benefits of Lending Relationships: Evidence from Small Business Data

TL;DR: In this article, the authors empirically examined how ties between a firm and its creditors affect the availability and cost of funds to the firm and found that the primary benefit of building close ties with an institutional creditor is that the availability of financing increases.
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