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Title:Capital regulation, liquidity requirements and taxation in a dynamic model of banking PDF Logo
Authors:De Nicolò, Gianni
Gamba, Andrea
Luccetta, Marcella
Issue Date:2012
Series/Report no.:Discussion Paper, Deutsche Bundesbank 10/2012
Abstract:This paper studies the impact of bank regulation and taxation in a dynamic model where banks are exposed to credit and liquidity risk and can resolve financial distress in three costly forms: bond issuance, equity issuance or fire sales. 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 threshold. By contrast, liquidity requirements reduce lending, efficiency and welfare significantly. On taxation, corporate income taxes generate higher government revenues and entail lower efficiency and welfare costs than taxes on non-deposit liabilities.
Subjects:Bank Regulation
Taxation
Dynamic Banking Model
JEL:G21
G28
G33
ISBN:978-3-86558-809-8
Document Type:Working Paper
Appears in Collections:Discussion Papers, Deutsche Bundesbank

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