Lending on hold: Regulatory uncertainty and bank lending standards

 

ABSTRACT: The 2011—2013 rule-making process for the regulation of qualified mortgages was correlated with a reduction in mortgage lending. In this article, we document this correlation at the bank level. Using a novel measure of banks' perception of regulatory uncertainty, we offer suggestive evidence that banks that perceived higher regulatory uncertainty (or that were more adverse to it) reduced lending more severely. Other channels that might explain banks' lending behavior—investment/securitization, putbacks by government sponsored enterprises, and general economic uncertainty—are also considered. Read More

Some Implication of Knightian Uncertainty for Financial and Regulation

 

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Some Implications of Knightian Uncertainty for Finance and Regulation

 

With the recession of 2008 "uncertainty" has become a buzzword. Since then, economists have largely shaped how policy-makers, politicians, and the general public think about uncertainty, through, among others, models that explicitly account for uncertainty. Read more

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