Morrison, Alan and Walther, Ansgar Market Discipline and Systemic Risk. Management Science. (Accepted)
Full text not available from this repository.Abstract
We analyze a general equilibrium model in which financial institutions generate endogenous systemic risk. Banks optimally select correlated investments and thereby expose themselves to re-sale risk so as to sharpen their incentives. Systemic risk is therefore a natural consequence of banks' fundamental role as delegated monitors. Our model sheds light on recent and historical trends in measured systemic risk. Technological innovations and government-directed lending can cause surges in systemic risk. Strict capital requirements and well-designed government asset purchase programs can combat systemic risk.
Item Type: | Article |
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Keywords: | systemic risk, market discipline, return correlation, macro-prudential regulation, finance |
Subject(s): | Finance |
Date Deposited: | 12 Nov 2018 10:21 |
Last Modified: | 12 Nov 2018 10:21 |
Funders: | n/a |
URI: | http://eureka.sbs.ox.ac.uk/id/eprint/7040 |
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