Search Results
Working Paper
National Interests, Spillovers and Macroprudential Coordination
This paper presents a simple two-region banking model of liquidity mismatch to study the strategic interactions between national regulators. I show that banks hold insufficient liquidity, which has repercussions for other banks in an international financial market. The model justifies coordinated prudential liquidity regulation due to an international fire-sale externality. However, I theoretically and empirically argue that domestically oriented regulators from jurisdictions with a smaller banking sector do not internalize the global benefits of regulation and therefore do not adhere to ...
Working Paper
International Financial Regulation: The Role of Banking Sector Sizes
This paper presents a simple N region banking model of liquidity mismatch to study the strategic interactions between national regulators. Banks hold insufficient liquidity, which leads to a fire-sale externality in an international financial market, justifying coordinated prudential regulation. However, countries with a smaller banking sector internalize less of the inefficiency and have an incentive to free-ride on foreign regulation. As a consequence, countries cannot agree on common regulatory standards. Further, small countries have a strictly positive marginal cost to regulate, which ...