The Simple Economics of Bank Regulation
1982; Wiley; Volume: 49; Issue: 195 Linguagem: Inglês
10.2307/2553625
ISSN1468-0335
Autores Tópico(s)Economic theories and models
ResumoThis paper discusses the effects of central bank regulation of the banking system carried out to control the level of bank lending. Prudential regulation, designed to reduce the frequency of bank failure-a problem in the economics of uncertainty and information-is not considered. The main point of this paper is that bank regulation, in so far as it is effective, and goes beyond the general effects of government intervention in credit markets, can be seen as a tax on transactions intermediated through banks. The variations in the incidence and beneficiaries of the tax provide a convenient framework for the different regulatory schemes. The paper focuses on the effect of regulation on an individual bank. The theory presented here is an elementary comparative static one, based on the equality of marginal cost and marginal revenue. It does not consider the more complicated issues of dynamic control. However, it is unlikely that any policy that has unsatisfactory comparative static properties will be successful. The main ideas of this approach are due to Tobin (1963) and Johnson (1967,197 1). They have been further developed in work by Spencer and Mowl (1978), and Artis and Miller (1978). However, the application of the analysis to the effects of different types of regulation is, I believe, new. A general equilibrium model in the same spirit as the partial equilibrium model used here is given by Fama (1980). The following section presents a simple model of the banking system. Section II discusses the effect of government intervention and regulation, and Section III looks at the way in which government regulation induces disintermediation. Section IV applies the previous results to consider various actual or proposed schemes in practice. The final section draws conclusions.
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