A new International Monetary Fund research paper studies the impact of bank regulation and taxation in a dynamic model with banks exposed to credit and liquidity risk.
Authors Gianni De Nicolò, Andrea Gamba and Marcella Lucchetta find an "inverted U-shaped relationship between capital requirements and bank lending, efficiency and welfare, with their benefits turning into costs beyond a certain requirement threshold", according to the paper.
By contrast, the study finds liquidity requirements red
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