The fractional reserve theory of money creation only considers the reserve requirement but ignores prudential regulations. We study the impacts of three prudential regulations under the Basel III framework on the commercial bank's ability to create money. Using a balance sheet approach, we...

After the destructive impact of the global financial crisis of 2008, many believe that pre-crisis financial market regulation did not take the "big picture" of the system suffciently into account and, subsequently, financial supervision mainly "missed the forest for the trees". As a result, the...

We use required 8-K filings around major borrowings to shed light on firms' choices of whether to comply with SEC disclosure rules. We first develop a simple model in which the firm weighs the benefit of obscuring the disclosure of an adverse event, against the cost of failing to comply with a...

I examine the real effects of macroprudential foreign exchange (FX) regulations designed to reduce risk-taking by financial intermediaries. I exploit a natural experiment in South Korea at the bank-level that can be traced through firms. The regulation limits the banks’ ratio of FX derivatives...

Housing market developments are in the spotlight in Europe. Over-stretched valuations amid tightening financial conditions and a cost-of-living crisis have increased risks of a sustained downturn and exposed challenging trade-offs for macroprudential policy between ensuring financial system...

To address the challenges posed by global systemically important banks (G-SIBs), the Basel Committee on Banking Supervision recommended an "additional loss absorbency requirement" for these institutions. Along these lines, I develop a microfounded design of capital surcharges that target the...

I study rollover risk in the wholesale funding market when intermediaries can hold liquidity ex ante and are subject to fire sales ex post. Precautionary liquidity restores multiple equilibria in a global rollover game. An intermediate liquidity level supports both the usual run equilibrium and...

This paper combines loan-level administrative data with household-level survey data to analyze the impact of recent macroprudential policy changes in Canada using a microsimulation model of mortgage demand of first-time homebuyers. Policies targeting the loan-to-value ratio are found to have a...

Objectives-based legislation - or laws which focus on achieving particular and concrete outcomes - has become a new and important tool that financial sector regulators use to tackle large and varied financial system risks. Yet, objectives-based legislation - and the frequent principles-based...

The Bank for International Settlements (BIS) and the Bank of Korea (BoK) jointly organized a conference on macroprudential regulation and policy in Seoul, Korea, on 16-18 January 2011. The conference aimed to bring academics together with researchers at central banks and other public...