EconPapers    
Economics at your fingertips  
 

Sectoral Countercyclical Buffers in a DSGE Model with a Banking Sector

Marcos Castro

No 503, Working Papers Series from Central Bank of Brazil, Research Department

Abstract: We develop and estimate a closed economy DSGE model with banking sector to assess the impact of introducing sectoral countercyclical capital buffers as a macroprudential tool. The model is developed to represent Brazilian bank credit markets. It features three types of bank credit — housing, consumer and commercial — as well as loans provided by a development bank. Loans are long-term, and government regulates housing loans, influencing both interest rates and loan supply. Banks are subject to bank capital requirement, and both broad (CCyB) and sectoral (SCCyB) countercyclical buffers can be introduced by macroprudential authorities. We simulate alternative policies using SCCyBs and CCyB with implementable nonlinear rules using broad and sectoral credit gaps as indicators, and compared the resulting performances. We conclude that, compared with CCyB alone, SCCyBs provide a more flexible set of instruments that allows achieving better macroeconomic stabilization in terms of variances of credit, total capital requirement and capital adequacy ratio. However, the marginal benefit of those SCCyB policies relative to the CCyB-only policy is lower than the improvements obtained by this latter policy compared with the reference scenario with no buffer. Also, SCCyB policies imply more frequent intervention, suggesting that in practice introducing these additional instruments may require more complex implementation procedures.

Date: 2019-09
New Economics Papers: this item is included in nep-ban, nep-cba, nep-dge and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
https://www.bcb.gov.br/content/publicacoes/WorkingPaperSeries/wps503.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bcb:wpaper:503

Access Statistics for this paper

More papers in Working Papers Series from Central Bank of Brazil, Research Department
Bibliographic data for series maintained by Rodrigo Barbone Gonzalez ().

 
Page updated 2025-03-19
Handle: RePEc:bcb:wpaper:503