Setting countercyclical capital buffers based on early warning models: would it work?

Carsten Detken, Tuomas Peltonen (), Willem Schudel and Markus Behn

No 1604, Working Paper Series from European Central Bank

Abstract: This paper assesses the usefulness of private credit variables and other macrofinancial and banking sector indicators for the setting of Basel III / CRD IV countercyclical capital buffers (CCBs) in a multivariate early warning model framework, using data for 23 EU Members States from 1982 Q2 to 2012 Q3. We find that in addition to credit variables, other domestic and global financial factors such as equity and house prices as well as banking sector variables help to predict vulnerable states of the economy in EU Member States. We therefore suggest that policy makers take a broad approach in their analytical models supporting CCB policy measures. JEL Classification: G01, G21, G28

Keywords: Banking crises; Basel III; countercyclical capital buffer; CRD IV; early warning model; financial regulation (search for similar items in EconPapers)
Date: 2013-11
New Economics Papers: this item is included in nep-ban, nep-cba and nep-rmg
Note: 229418
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (96)

Downloads: (external link)
https://www.ecb.europa.eu//pub/pdf/scpwps/ecbwp1604.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:ecb:ecbwps:20131604

Access Statistics for this paper

More papers in Working Paper Series from European Central Bank 60640 Frankfurt am Main, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Official Publications ().