Macro-Prudential Policy under Moral Hazard and Financial Fragility

Citation data:

BANCO DE LA REPÚBLICA, BORRADORES DE ECONOMIA, No: 012695

Publication Year:
2015
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Repository URL:
http://repositorio.banrep.gov.co/handle/20.500.12134/6167
RePec URLs:
https://ideas.repec.org/p/col/000094/012695.html; https://ideas.repec.org/p/bdr/borrec/878.html
Author(s):
Arango-Arango, Carlos Alberto; Valencia-Arana, Oscar Mauricio
Publisher(s):
Banco de la República
Tags:
G11 - Portfolio Choice; Investment Decisions; O33 - Technological Change: Choices and Consequences; Diffusion Processes; D86 - Economics of Contract: Theory; DSGE modeling; Financial frictions; Moral hazard; Macro-prudential policies; Administración bancaria; Depósitos bancarios; Sistema financiero; Liquidez bancaria; Apalancamiento financiero; Política económica; D86 - Economía de los contratos: teoría; O33 - Cambio tecnológico: opciones y consecuencias; Difusión; G11 - Selección de cartera; Decisiones de inversión; DSGE modeling, Financial frictions, Moral hazard, Macro-prudential policies.
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paper description
This paper presents a DSGE model with banks that face moral hazard in management. Banks receive demand deposits and fund investment projects. Banks are subject to potential withdrawals by depositors which may force them into early liquidation of their inv