Christiano, Lawrence; Dalgic, Hüsnü; Li, Xiaoming - National Bureau of Economic Research - 2022
We consider bank panic models in which, depending on the configuration of fundamentals, there can be a positive … probability of a bank panic. A crucial assumption in these models is that new equity cannot enter in a panic. We quantify the … restriction on bank leverage. We compute the Ramsey-optimal leverage restriction but find that there is an implementation problem …
