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Assessing the Impact of Basel III: Review of Transmission Channels and Insights from Policy Models

Olivier de Bandt, C. Bora Durdu, Hibiki Ichiue, Yasin Mimir, Jolan Mohimont, Kalin Nikolov, Sigrid Roehrs, Jean-Guillaume Sahuc, Valerio Scalone and Michael Straughan
Additional contact information
Hibiki Ichiue: Keio University
Sigrid Roehrs: Deutsche Bundesbank
Valerio Scalone: European Central Bank

International Journal of Central Banking, 2024, vol. 20, issue 1, 1-52

Abstract: This paper (i) reviews the different channels of transmission of prudential policy highlighted in the literature and (ii) provides a quantitative assessment of the impact of Basel III reforms using several policy-oriented DSGE models. It shows that the long-term effects on GDP of higher capital requirements are positive when the associated benefits are accounted for in addition to their costs. However, the results crucially depend on assumptions about crisis probability and severity. For liquidity regulations, only models capturing benefits of increased liquidity (e.g., preventing bank runs) show a net benefit.

JEL-codes: E3 E44 G01 G21 G28 (search for similar items in EconPapers)
Date: 2024
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Working Paper: Assessing the Impact of Basel III: Review of Transmission Channels and Insights from Policy Models (2024)
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Persistent link: https://EconPapers.repec.org/RePEc:ijc:ijcjou:y:2024:q:1:a:1

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