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dc.contributor.authorGalaasen, Sigurd Mølster
dc.contributor.authorJohansen, Rønnaug Melle
dc.date.accessioned2018-02-06T17:14:00Z
dc.date.available2018-02-06T17:14:00Z
dc.date.issued2016
dc.identifier.isbn978-82-7553-950-0
dc.identifier.issn1504-2596
dc.identifier.urihttp://hdl.handle.net/11250/2483070
dc.description.abstractIn this paper we develop a dynamic model of bank behaviour to study cyclical capital regulation. We study the decision problem of a single bank that chooses its dividend policy and holds a portfolio of long-term loans (retail and corporate market), financed by internal (equity) and external (debt) funds. The demand for and return on bank lending is uncertain, determined by the state of the business cycle, which follows an exogenous Markov process. The model is calibrated using balance sheet and income statement data from seven of the largest Norwegian banking groups. To determine the probability and severity of a crisis we rely on cross-country data that covers several financial crises. In our main policy experiment we show that a time-varying capital requirement, which is decreased when loan losses are high, reduces the volatility of lending considerably compared with a fixed capital requirement. The reason for this is that lowering capital requirements when loan losses are high reduces the bank’s need to cut lending, relative to a fixed requirement.nb_NO
dc.language.isoengnb_NO
dc.publisherNorges Banknb_NO
dc.relation.ispartofseriesStaff Memo;22/2016
dc.titleCyclical Capital Regulation and Dynamic Bank Behaviournb_NO
dc.typeWorking papernb_NO
dc.subject.nsiVDP::Samfunnsvitenskap: 200::Økonomi: 210nb_NO
dc.source.pagenumber53nb_NO


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