Financial (In)Stability, Supervision and Liquidity Injections

A Dynamic General Equilibrium Approach

Dados Bibliográficos

ID9709566
AutoresGregory De Walque (National Bank of Belgium), Olivier Pierrard (Central Bank of Luxembourg and Université Catholique de Louvain), Abdelaziz Rouabah (Central Bank of Luxembourg)
Ano2010
Volume120
Fascículo549
Páginas1234-1261
Data de publicação2010-12-01
Peer ReviewedSim
Open AccessSim
TipoARTICLE
PeriódicoThe Economic Journal (JOURNAL)
Identificadores do periódicoISSN: 0013-0133 • E-ISSN: 1468-0297
EditoraOxford University Press (OUP) (PUBLISHER)
DOI10.1111/j.1468-0297.2010.02383.x
OpenAlexW3124331876
IdiomaEN
Citações recebidas1
Referências citadas27

This paper develops a dynamic stochastic general equilibrium model with interactions between an heterogeneous banking sector and other private agents. We introduce endogenous default probabilities for both firms and banks, and allow for bank regulation and liquidity injection into the interbankmarket. Our aim is to understand the importance of supervisory and monetary authorities to restore financial stability. The model is calibrated against real data and used for simulations. We show that liquidity injections reduce financial instability but have ambiguous effects on output fluctuations. The model also confirms the partial equilibrium literature results on the procyclicality of Basel II

Basel III · Capital requirement · Economics · Financial stability · Financial system · General equilibrium theory · Liquidity risk · Market liquidity · Microeconomics · Monetary economics · Partial equilibrium · Stability (learning theory · Banking stability, regulation, efficiency · Computer Science · Economic theories and models · Finance · Global Financial Crisis and Policies