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Bank capital regulation seems to be today's most accepted regulatory instrument. The reasoning is that limited … regulation influences this decision. This paper attempts to give an overview of the literature in order to see what theory …
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We study optimal capital requirement regulation in a dynamic quantitative model in which nonfinancial firms, as well as households, hold deposits. Firms hold deposits for precautionary reasons and to facilitate the acquisition of production inputs. Our theoretical analysis identifies a novel...
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