Monetary Policy with a touch of Basel

IMF Working Papers, October 1, 2001

Source details

Canonical URL

Monetary Policy with a touch of Basel

Other formats

• Markdown version
• Structured JSON version
• Bundle manifest

Bibliographic details

• Authors: Ralph Chami, Thomas F. Cosimano
• Published: October 1, 2001
• Series: IMF Working Papers
• DOI: https://doi.org/10.5089/9781451857030.001

Authors and publication

• By Ralph Chami, Thomas F. Cosimano
• October 1, 2001
• IMF Working Papers, Working Paper No. 2001/151
• Issue: 151
• Volume: 2001
• Pages: 47
• DOI: https://doi.org/10.5089/9781451857030.001
• Stock No: WPIEA1512001
• ISBN: 9781451857030
• ISSN: 1018-5941
• Citation example (from source): Ralph Chami, and Thomas F. Cosimano "Monetary Policy with a touch of Basel", IMF Working Papers 2001, 151 (2001), accessed 9/9/2026, https://doi.org/10.5089/9781451857030.001

Central thesis

• The traditional view that monetary policy operates mainly by manipulating bank reserves is less applicable when only a small portion of bank deposits are subject to reserve requirements.
• Over the last decade, capital requirements have effectively replaced reserve requirements as the main constraint on the behavior of banks.
• The paper identifies a "bank balance-sheet channel" of monetary policy, which operates through the impact on the money stock and the economy.

Key findings and concepts

• Capital requirements (Basel) have become the predominant constraint shaping bank behavior in place of reserve requirements.
• The "bank balance-sheet channel" is a distinct mechanism through which monetary policy affects banks, the money stock, and economic activity.
• Subjects covered include: Bank credit; Banking; Basel Core Principles; Capital adequacy requirements; Deposit rates; Financial institutions; Financial regulation and supervision; Financial services; Loans; Money.

Keywords and analytical focus

• accelerator effect
• bank behavior
• bank capital
• Bank credit
• banking industry
• Basel Core Principles
• Capital adequacy requirements
• capital constraint
• capital requirements
• Deposit rates
• Global
• loan rate
• Loans
• monetary policy
• WP

Policy implications and relevance

• Monetary policy analysis should account for capital adequacy constraints when assessing how policy changes propagate through banks to the money stock and the real economy.
• Basel capital requirements alter the transmission mechanism of monetary policy, implying that traditional reserve-focused frameworks may be insufficient for policy design and evaluation.

Source: IMF Working Paper "Monetary Policy with a touch of Basel" (Ralph Chami and Thomas F. Cosimano), October 1, 2001.

Content in this bundle

• Monetary Policy with a Touch of Basel - WP/01/151
  • Monetary Policy with a Touch of Basel - WP/01/151 (Markdown version)
  • Monetary Policy with a Touch of Basel - WP/01/151 (PDF)