Macroeconomic Costs of Higher Bank Capital and Liquidity Requirements

Scott Roger and Jan Vlcek

No 2011/103, IMF Working Papers from International Monetary Fund

Abstract: This paper uses a DSGE model with banks and financial frictions in credit markets to assess the medium-term macroeconomic costs of increasing capital and liquidity requirements. The analysis indicates that the macroeconomic costs of such measures are sensitive to the length of the implementation period as well as to the adjustment strategy used by banks, and the scope for monetary policy to respond to the regulatory changes.

Keywords: WP; bank; lending; liquidity; capital; monetary policy; Capital and liquidity requirements; financial frictions; macro-financial linkages; capital requirement; peak lending; bank capital buffer; asset ratio; transmission mechanism; type monetary policy rule; lending contract; gradual adjustment; Liquidity requirements; Capital adequacy requirements; Loans; Bank credit; Central bank policy rate; Europe (search for similar items in EconPapers)
Pages: 51
Date: 2011-05-01
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Citations: View citations in EconPapers (34)

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