Bank regulation and supervision and its welfare implications |
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Authors: | Mustafa Kilinc Bilin Neyapti |
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Institution: | 1. Central Bank of the Republic of Turkey, Research and Monetary Policy Department, Istiklal Cad 10 Ulus, 06100 Ankara, Turkey;2. Bilkent University, Ankara, Turkey |
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Abstract: | This study provides a general equilibrium model to explore the welfare implications of bank regulation and supervision (RS). The model supports the basic expectations regarding the positive effects of RS on the growth rate, output, credit, investment, wages and profits; and its negative effects on the interest rate. In addition, RS is observed to lead to a convergence effect. Furthermore, it is observed that the decision of banks to monitor and charge differentiated interest rates to firms depends on the distribution of firm-specific moral hazard rates; bank monitoring increases profits as the distribution of producer type improves. |
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Keywords: | E44 G28 O16 |
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