Prudential Policy with Distorted Beliefs
研究了当股权投资者或债权人存在信念扭曲时，最优杠杆监管如何调整，发现投资者乐观应放松监管，债权人或双方乐观则应收紧监管。
This paper studies leverage regulation when equity investors and/or creditors have distorted beliefs relative to a planner. We characterize how the optimal regulation responds to arbitrary changes in investors’/creditors’ beliefs, relating our results to practical scenarios. We show that the optimal regulation depends on the type and magnitude of such changes. Optimism by investors calls for looser leverage regulation, while optimism by creditors, or jointly by both investors/creditors, calls for tighter leverage regulation. Our results apply to environments with (i) planners with imperfect knowledge of investors’/creditors’ beliefs, (ii) monetary policy, (iii) bailouts and pecuniary externalities, and (iv) endogenous beliefs.