34 , 2017-07 , Graduate School of Economics and Osaka School of International Public Policy (OSIPP) Osaka University
I introduce financial market friction into a neoclassical growth model. I consider a moral hazard problem between bankers and workers in the macroeconomic model. Using the model, this study analyzes how capital adequacy requirements for banks affect the economy. I show that strengthening capital adequacy requirements is desirable for an economy whose financial market has not developed sufficiently. Regulatory authorities should pull up the minimum capital adequacy ratio in a country whose financial market has not developed sufficiently. Moreover, there is no need to change the minimum capital adequacy ratio in a country whose financial market has developed sufficiently even if the economy experiences a recession.