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Working Paper
Bank capital regulation: a reconciliation of two viewpoints
There are two seemingly inconsistent strands of the finance literature regarding the effects of bank capital regulation. On the one hand, the value maximization literature implies that more stringent capital regulation will reduce the probability of bank failure and the risk exposure of the deposit insurance fund. On the other hand, the utility-maximization literature, using the Markowitz two-parameter portfolio model, concludes that more stringent capital regulation will increase asset risk and can increase the probability of bank failure. ; In this paper, we show that this seeming ...
Working Paper
Does capital regulation affect bank risk-taking?
Working Paper
Rational expectations and the Fisher effect: implications of monetary regime shifts
This paper develops a simple rational expectations model of the inflation process that is used to test the Fisher effect. The model emphasizes the link between money and expected inflation, and hence the monetary regime followed by the central bank. The model is estimated with U.S. data over the 1953-1986 period. We find that instability in the observed Fisher effect is associated with monetary regime shifts, and that the forecastability of money under different money regimes is an important determinant of the extent to which the Fisher effect is statistically observable.
Working Paper
Deposit insurance, risk, and market power in banking
A fixed-rate deposit insurance system provides a moral hazard for excessive risk taking and is not viable absent regulation. Although the deposit insurance system appears to have worked remarkably well over most of its 50-year history, major problems began to appear in the early 1980s. This paper addresses the puzzle of why major problems began to arise in the early 1980s and not sooner. ; The hypothesis is that increases in competition caused bank charter values to decline, which, in turn, caused banks to- increase default risk through increases. in asset risk and reductions in capital. This ...
Journal Article
Monetary policy in a deregulated world
Journal Article
Bank capital regulation in the early 1980s
Journal Article
A cashless society?
Journal Article
Regulating bank capital
Journal Article
The big switch