Agénor, Pierre-Richard; Silva, Luiz A. Pereira da - 2017
The effects of capital requirements on risk-taking and welfare are studied in a stochastic overlapping generations … between a safe technology and a risky (but socially inefficient) technology, and bank risk-taking is endogenous. Setting the … capital adequacy ratio above a structural threshold can eliminate the equilibrium with risky loans (and thus inefficient risk …