Using the Countercyclical Capital Buffer: Insights from a structural model

Matija Lozej and Martin O'Brien ()

No 7/EL/18, Economic Letters from Central Bank of Ireland

Abstract: This Letter looks at what happens after a demand-induced economic expansion with and without the activation of the Countercyclical Capital Buffer (CCyB). The main findings are that without the activation of the CCyB, bank resilience is diminished for an extended period. A timely activation of the CCyB alleviates the short-run decrease in bank resilience and enhances it in the medium-to-long term without substantially reducing economic expansion. If the activation is delayed, the reduced bank resilience persists longer. The cost of incorrectly timing the tightening of the CCyB is small. The macroeconomic impact of tightening is smaller the further above banks’ actual capital ratios are from their regulatory minimum requirement.

Date: 2018-07
New Economics Papers: this item is included in nep-ban
References: Add references at CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
https://www.centralbank.ie/docs/default-source/pub ... 'brien).pdf?sfvrsn=6 (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:cbi:ecolet:7/el/18

Access Statistics for this paper

More papers in Economic Letters from Central Bank of Ireland Contact information at EDIRC.
Bibliographic data for series maintained by Fiona Farrelly ().