Under the new Basle Capital Accords, regulation takes the form of a contingency rule prescribing a certain level of bank capital contingent on the bank's risk taking behaviour in choosing its asset portfolio. In a simple dynamic model of banking with binding regulation we show that such Basle II...

This paper focuses on the interaction between regulation and competition in an industrial organisation model. We analyse how capital requirements a.ect the pro.tability of two banks that compete as Cournot duopolists on a market for loans. Bank management of both banks choose optimal levels of...

In a dynamic framework banks compete for customers by setting lending conditions for the loans they supply, taking into account the capital adequacy requirements posed by the regulator. By easing its lending conditions a bank faces a tradeoff between attracting more demand for loans, thus making...

In a dynamic framework banks compete for customers by setting lending conditions for the loans they supply, taking into account the capital adequacy requirements posed by the regulator. By easing its lend- ing conditions a bank faces a tradeoff between attracting more demand for loans, thus...

The overall costs of the payment system to society are considerable. These costs depend on the relative usage of the available payment instruments, which differ in the costs that each entails to market participants in the payment chain. In the Netherlands, debit card payments have become less...

This study is an introduction to and summary of the 2002 Annual Meeting papers of the Royal Netherlands Economic Association. The general theme of this year's Annual Meeting is 'The role of wealth in the economy'. It is covered by 5 papers, which address the following topics: (i) household...

We document how firm-specific volatility in sales, earnings and employment growth evolved year by year in Japan. Our volatility measure also indicates the evolution of firm turnover. We find that patterns in firm-specific volatility have changed when macroeconomic circumstances have. Firm...

For a panel of 20 industrialized countries from 1970 through 2002,we analyze the role of financial variables in economic cycles. We focus on equity busts, which are considered a proxy for downward revisions of economic prospects. Our empirical findings provide support for financial accelerator...

Five years after Lehman Brothers defaulted, the Dutch consumer confidence is still very low. Based on a monthly time series analysis from 1978 onwards, we provide evidence that general economic indicators are not sufficient to explain consumer sentiment. We show that during the Great Recession...

Correlation between the risks of portfolios of different commercial banks leads to too much risk taking from a social planner's perspective. The presence of a regulator omproves this risk-benefit allocation of the financial system. In this paper I show that first-best regulation also leads to...