Abstract
In this paper we assess the effects of deposit rate regulation on banks risk taking activities within a multi-period theoretical framework, which we have developed in the spirit of Crouhy and Galai (1991), or Hellmann et. al. (2000). After setting out the main characteristics of the model, we report results of numerical simulations and illustrate how different types of deposit rate ceilings affect a bank's optimal strategy. We particularly focus our analysis on the impact of the risky asset's volatility and of changes in the competitive environment in which banks operate.
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