Macroeconomic Costs of Higher Bank Capital and Liquidity Requirements

May 1, 2011

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Format: Chicago

Scott Roger, and Jan Vlcek. Macroeconomic Costs of Higher Bank Capital and Liquidity Requirements, (USA: International Monetary Fund, 2011) accessed December 21, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

This paper uses a DSGE model with banks and financial frictions in credit markets to assess the medium-term macroeconomic costs of increasing capital and liquidity requirements. The analysis indicates that the macroeconomic costs of such measures are sensitive to the length of the implementation period as well as to the adjustment strategy used by banks, and the scope for monetary policy to respond to the regulatory changes.

Subject: Bank credit, Banking, Capital adequacy requirements, Central bank policy rate, Financial institutions, Financial regulation and supervision, Financial services, Liquidity requirements, Loans, Money

Keywords: Asset ratio, Bank, Bank capital buffer, Bank credit, Capital, Capital adequacy requirements, Capital and liquidity requirements, Capital requirement, Central bank policy rate, Europe, Financial frictions, Gradual adjustment, Lending, Lending contract, Liquidity, Liquidity requirements, Loans, Macro-financial linkages, Monetary policy, Peak lending, Transmission mechanism, Type monetary policy rule, WP

Publication Details

Pages:

51
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2011/103
Stock No:

WPIEA2011103
ISBN:

9781455260386
ISSN:

1018-5941

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