Department seminar by Ajay Subramanian, J. Mack Robinson College of Business at Georgia State UniversityExport this event to calendar

Friday, June 14, 2019 — 10:30 AM EDT

Aggregate Risk and Bank Regulation in General Equilibrium


We examine the optimal design of bank regulation in a general equilibrium model. The unregulated economy has multiple equilibria that feature varying sizes of the financial sector and bank fragility. The economy underinvests (overinvests) in risky production when aggregate risk is low (high). We characterize and implement the efficient allocations via capital and reserve requirements, deposit insurance and bailouts. There is a range of efficient regulatory policies with a stricter capital requirement on banks being accompanied by a looser reserve requirement and less deposit insurance. We derive novel insights into how aggregate risk influences capital and reserve requirements as well as the efficiency of depositor subsidies.

Location 
M3 - Mathematics 3
Room: 3127
200 University Avenue West

Waterloo, ON N2L 3G1
Canada

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