Macro Prudential Policies from a Micro Prudential Angle

World Bank Policy Research Working Paper No. 6721

9 Pages Posted: 13 Dec 2013

Multiple version iconThere are 2 versions of this paper

Date Written: December 11, 2013

Abstract

The standard macro(prudential) models focus on externalities and treat all prudential instruments as alternative, but equivalent, forms of Pigouvian taxes. This paper explicitly models individual banks' risk choices and shows that different prudential instruments affect banks' risk-taking incentives differently. Thus, conflicts may arise between the micro and macro prudential stance.

Keywords: Macroprudential Regulation, Microprudential Regulation, Bank Risk Taking

JEL Classification: G21, G28

Suggested Citation

Cordella, Tito and Pienknagura, Samuel, Macro Prudential Policies from a Micro Prudential Angle (December 11, 2013). World Bank Policy Research Working Paper No. 6721. Available at SSRN: https://ssrn.com/abstract=2366521 or http://dx.doi.org/10.2139/ssrn.2366521

Tito Cordella (Contact Author)

World Bank ( email )

1818 H Street, N.W.
Washington, DC 20433
United States
202-473-0043 (Phone)

Samuel Pienknagura

World Bank ( email )

1818 H Street, NW
Washington, DC 20433
United States

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