Basel III: Long-term impact on economic performance and fluctuations

Paolo Angelini, Laurent Clerc, Vasco C�rdia (), Leonardo Gambacorta, Andrea Gerali (), Alberto Locarno (), Roberto Motto (), Werner Roeger (), Skander Van den Heuvel () and Jan Vlcek
Additional contact information
Vasco C�rdia: Federal Reserve Bank of New York
Roberto Motto: European Central Bank
Werner Roeger: European Commission
Authors registered in the RePEc Author Service: Vasco Cúrdia

No 87, Questioni di Economia e Finanza (Occasional Papers) from Bank of Italy, Economic Research and International Relations Area

Abstract: We assess the long-term economic impact of the new regulatory standards (the Basel III reform), answering the following questions. (1) What is the impact of the reform on long-term economic performance? (2) What is the impact of the reform on economic fluctuations? (3) What is the impact of the adoption of countercyclical capital buffers on economic fluctuations? The main results are the following. (1) Each percentage point increase in the capital ratio causes a median 0.09 percent decline in the level of steady state output, relative to the baseline. The impact of the new liquidity regulation is of a similar order of magnitude, at 0.08 percent. This paper does not estimate the benefits of the new regulation in terms of reduced frequency and severity of financial crisis, analysed in Basel Committee on Banking Supervision (BCBS, 2010b). (2) The reform should dampen output volatility; the magnitude of the effect is heterogeneous across models; the median effect is modest. (3) The adoption of countercyclical capital buffers could have a more sizeable dampening effect on output volatility. These conclusions are fully consistent with those of reports by the Long-term Economic Impact group (BCBS, 2010b) and Macro Assessment Group (MAG, 2010b).

Keywords: Basel III; countercyclical capital buffers; financial (in)stability; procyclicality; macroprudential (search for similar items in EconPapers)
JEL-codes: E44 E61 G21 (search for similar items in EconPapers)
Date: 2011-02
New Economics Papers: this item is included in nep-ban, nep-cba, nep-fmk, nep-mac, nep-reg and nep-rmg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (65)

Downloads: (external link)
https://www.bancaditalia.it/pubblicazioni/qef/2011-0087/QEF_87.pdf (application/pdf)

Related works:
Journal Article: Basel III: Long-term Impact on Economic Performance and Fluctuations (2015)
Working Paper: BASEL III: Long-term impact on economic performance and fluctuations (2011)
Working Paper: BASEL III: Long-term impact on economic performance and fluctuations (2011)
Working Paper: BASEL III: long-term impact on economic performance and fluctuations (2011)
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:bdi:opques:qef_87_11

Access Statistics for this paper

More papers in Questioni di Economia e Finanza (Occasional Papers) from Bank of Italy, Economic Research and International Relations Area Contact information at EDIRC.
Bibliographic data for series maintained by ().