The role of banking regulation in an economy under credit risk and liquidity shock |
| |
| Institution: | 1. Central Bank of Brazil, Brazil;2. Catholic University of Brasilia, Graduate Program of Economics, Brazil;1. University of Pretoria, South Africa;2. Helmut Schmidt University, Germany;3. University of Nebraska at Omaha, United States;4. University of Nebraska-Omaha and Loughborough University, United States;1. Department of Economics and Quantitative Methods, Westminster Business School, University of Westminster, London NW1 5LS, UK;2. Department of Economics and IME, University of Salamanca, Salamanca, Spain;1. John Molson School of Business, Concordia University, Montreal, QC H3G 1M8, Canada;2. Faculty of Business Administration, Memorial University of Newfoundland, St. John’s NL A1B 3X5, Canada;1. Department of Finance and Insurance, Miller College of Business, Ball State University, Muncie, IN 47306, United States;2. Department of Accounting, University of St. Thomas, St. Paul, MN 55105, United States |
| |
| Abstract: | This paper develops a Dynamic Stochastic General Equilibrium model which includes a financial sector to analyze the effects of liquidity shock and credit risk in the Brazilian economy. Banks use equity capital and deposits from agents to finance investments of the productive sector. The sources of financial frictions are default rate and liquidity shock, due to deposits withdrawn in advance. The banking supervisor injects liquidity in the deposit market. Using data for the Brazilian economy in the period from 1995 to 2009, the structural parameters are estimated by Bayesian methods. Impulse response functions are computed to describe the dynamic effects of exogenous shocks. The major results show that credit risk is pro-cyclical and default risk depends on structural features. The banking regulator is able to set up a policy to promote financial stability and efficiently reduce fluctuations in the output. |
| |
| Keywords: | |
| 本文献已被 ScienceDirect 等数据库收录！ |
|
