Capital Regulation, Liquidity Requirements and Taxation in a Dynamic Model of Banking

De Nicoló, Gianni

This paper studies the impact of bank regulation and taxation in a dynamic model with banks exposed to credit and liquidity risk. We find an inverted U-shaped relationship between capital requirements and bank lending, efficiency, and welfare, with their benefits turning into costs beyond a certain requirement threshold. By contrast, liquidity requirements reduce lending, efficiency and welfare significantly. The costs of high capital and liquidity requirements represent a lower bound on the benefits of these regulations in abating systemic risks. On taxation, corporate income taxes generate higher government revenues and entail lower efficiency and welfare costs than taxes on non-deposit liabilities

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Year of publication:	2012
Authors:	De Nicolò, Gianni
Other Persons:	Gamba, Andrea (contributor) ; De Nicolò, Gianni (contributor) ; Lucchetta, Marcella (contributor)
Publisher:	Washington, D.C : International Monetary Fund
Subject:	Basler Akkord \| Basel Accord \| Bankenliquidität \| Bank liquidity \| Bankrisiko \| Bank risk \| Kreditgeschäft \| Bank lending \| Dynamische Wirtschaftstheorie \| Economic dynamics \| Unternehmensbesteuerung \| Corporate taxation