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Capital Regulation, Liquidity Requirements and Taxation in a Dynamic Model of Banking
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Author/Editor: |
De Nicoló, Gianni | Gamba, Andrea | Lucchetta, Marcella |
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March 1, 2012 |
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Electronic Access: |
Free Full Text (PDF file size is 1,418KB)
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Disclaimer: This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate.
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Summary: This paper studies the impact of bank regulation and taxation in a dynamic model with banks exposed to credit and liquidity risk. We find an inverted U-shaped relationship between capital requirements and bank lending, efficiency, and welfare, with their benefits turning into costs beyond a certain requirement threshold. By contrast, liquidity requirements reduce lending, efficiency and welfare significantly. The costs of high capital and liquidity requirements represent a lower bound on the benefits of these regulations in abating systemic risks. On taxation, corporate income taxes generate higher government revenues and entail lower efficiency and welfare costs than taxes on non-deposit liabilities.
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Order a print copy
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Series: |
Working Paper No. 12/72 |
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Subject(s): |
Bank regulations | Banking | Capital | Credit risk | Economic models | Liquidity | Taxation |
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Author's keyword(s): |
Bank Regulation | Taxation | Dynamic Banking Model |
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Published: |
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March 1, 2012 |
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Format: |
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Paper |
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Stock No: |
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WPIEA2012072 |
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Pages: |
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52 |
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Price: |
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US$18.00 (Academic Rate: US$18.00 )
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