Macro Prudential Policies from a Micro Prudential Angle
World Bank Policy Research Working Paper No. 6721
9 Pages Posted: 13 Dec 2013
Date Written: December 11, 2013
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: Suggested Citation