Optimal interbank regulation / by Thomas J. Carter.: FB3-5/2017-48E-PDF
"Recent years have seen renewed interest in the regulation of interbank markets. A review of the literature in this area identifies two gaps: first, the literature has tended to make ad hoc assumptions about the interbank contract space, which makes it difficult to generate convincing policy prescriptions; second, the literature has tended to focus on ex-post interventions that kick in only after an interbank disruption has come underway (e.g., open-market operations, lender-of-last-resort interventions, bail-outs), rather than ex-ante prudential policies. In this paper, I take steps toward addressing both these gaps, namely by building a simple model for the interbank market in which banks optimally choose the form of their interbank contracts. I show that the model delivers episodes that qualitatively resemble the interbank disruptions witnessed during the financial crisis. Some important implications for policy then emerge. In particular, I show that optimal policy requires careful coordination between ex-post and ex-ante interventions, with the ex-ante component surprisingly doing most of the heavy lifting. This suggests that previous literature has underemphasized the role that ex-ante interventions have to play in optimal interbank regulation."--Abstract, p. ii.
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Department/Agency | Bank of Canada. |
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Title | Optimal interbank regulation / by Thomas J. Carter. |
Series title | Bank of Canada staff working paper, 1701-9397 ; 2017-48 |
Publication type | Series - View Master Record |
Language | [English] |
Format | Electronic |
Electronic document | |
Note(s) | "November 2017." Includes bibliographical references. Text in English, abstract in English and French. |
Publishing information | Ottawa : Bank of Canada, 2017. |
Author / Contributor | Carter, Thomas. |
Description | ii, 63 p. : graphs |
Catalogue number |
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Subject terms | Banks Regulations International finance |
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