A Dynamic Model of Bank Behaviour under Multiple Regulatory Constraints

We develop a dynamic structural model of bank behaviour that provides a microeconomic foundation for bank capital and liquidity structures and analyses the effects of changes in regulatory capital and liquidity requirements as well as their interaction. Our findings suggest that adjustments in both types of requirements can have an impact on loan supply, with considerable heterogeneity across banks and over time. The model illustrates that banks' reactions depend on initial balance sheet conditions and reconciles evidence on short-term reductions in loan supply with findings suggesting that better capitalized banks are better able to lend in the medium- to long-term. JEL Classification: G21, G28, G32

• Publication year

  2019

• Venue

  Social Science Research Network

• Publication date

  Unknown publication date

• Fields of study

  Economics

• Identifiers
  DOI 10.2139/ssrn.3327174
• External record

  Open on Semantic Scholar

• Source metadata

  Semantic Scholar

• No claims are published for this paper.

• No concepts are published for this paper.

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