Prudential Policy with Distorted Beliefs

• 成果类型: Article
• 署名作者: Davila, Eduardo; Walther, Ansgar
• 署名单位: Yale University; National Bureau of Economic Research; Imperial College London; Center for Economic & Policy Research (CEPR)
• 刊物名称: AMERICAN ECONOMIC REVIEW
• ISSN/ISSBN: 0002-8282
• DOI: 10.1257/aer.20210753
• 发表日期: 2023
• 页码: 1967-2006
• 关键词: monetary-policy; credit; RISK; Bailouts; leverage; default

摘要

This paper studies leverage regulation when equity investors and/or creditors have distorted beliefs relative to a planner. We characterize how the optimal regulation responds to arbitrary changes in investors'/creditors' beliefs, relating our results to prac-tical scenarios. We show that the optimal regulation depends on the type and magnitude of such changes. Optimism by investors calls for looser leverage regulation, while optimism by creditors, or jointly by both investors/creditors, calls for tighter leverage regulation. Our results apply to environments with (i) planners with imperfect knowledge of investors'/creditors' beliefs, (ii ) monetary policy, (iii ) bailouts and pecuniary externalities, and (iv ) endogenous beliefs. (JEL D62, D83, E52, G01, G21, G28, H81)