Macroprudential Regulation versus mopping up after the crash
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Olivier Jeanne [1] ; Anton Korinek [2]
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[1] Johns Hopkins University
Johns Hopkins University
Estados Unidos
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[2] University of Virginia
University of Virginia
Estados Unidos
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- Localización: Review of economic studies, ISSN 0034-6527, Vol. 87, Nº 3, 2020, págs. 1470-1497
- Idioma: inglés
- Texto completo no disponible (Saber más ...)
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Resumen
How should macroprudential policy be designed when policymakers also have access to liquidity provision tools to manage crises? We show in a tractable model of systemic banking risk that there are three factors at play: first, ex post liquidity provision mitigates financial crises, and this reduces the need for macroprudential policy. In the extreme, if liquidity provision is untargeted and costless or if it completely forestalls crises by credible out-of-equilibrium lending-of-last-resort, there is no role left for macroprudential regulation. Second, however, macroprudential policy needs to consider the ex ante incentive effects of targeted liquidity provision. Third, if shadow banking reduces the effectiveness of macroprudential instruments, it is optimal to commit to less generous liquidity provision as a second-best substitute for macroprudential policy.
