Bouvatier, Vincent; Lepetit, Laetitia - In: Journal of Financial Stability 8 (2012) 1, pp. 25-31
This paper develops a partial equilibrium model of a banking firm to analyze how provisioning rules influence loan market fluctuations. We show that a backward-looking provisioning system amplifies the pro-cyclicality of loan market fluctuations. We demonstrate that, in a forward-looking...