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SUMMARY:Dynamic Bank Capital Regulation in Equilibrium - Marcella Lucchett
 a  (Università Ca’Foscari Venezia)
DTSTART:20181011T120000Z
DTEND:20181011T130000Z
UID:TALK109918@talks.cam.ac.uk
CONTACT:CERF/CF Admin
DESCRIPTION:We study optimal bank regulation in an economy with aggregate 
 uncertainty. Bank liabilities are used as “money” and hence earn lower
  returns than equity. In laissez faire equilibrium\, banks maximize market
  value\, trading off the funding advantage of debt against the risk of cos
 tly default. The capital structure is not socially optimal because externa
 l costs of distress are not internalized by the banks. The constrained eff
 icient allocation is characterized as the solution to a planner’s proble
 m. Efficient regulation is procyclical\, but countercyclical relative to l
 aissez faire. We show that simple leverage constraints can get the decentr
 alized economy close to the constrained efficient outcome.
LOCATION:Room W4.05 Cambridge Judge Business School
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