The Global Macroeconomic Costs of Raising Bank Capital Adequacy Requirements

Francis Vitek and Scott Roger

No 2012/044, IMF Working Papers from International Monetary Fund

Abstract: This paper examines the transitional macroeconomic costs of a synchronized global increase in bank capital adequacy requirements under Basel III, as well as a capital increase covering globally systemically important banks. The analysis, using an estimated multi-country model, contributed to the work of the Macroeconomic Assessment Group analysis, especially in estimating the potential international spillovers associated with a global increase in capital requirements. The magnitude of the effects found in this analysis is relatively modest, especially if monetary policies have scope to ease in response to a widening of interest rate spreads by banks.

Keywords: WP; capital requirement; capital; Mexican GSIBs; monetary policy response; MAG participant; Capital requirements; Basel III; scenario monetary policy; GDP weight; interest rate increase; bank response; interest rate spread; widening of bank lending; monetary policy scenario; interest rate differential; MAG mandate; Global systemically important banks; Spillovers; Central bank policy rate; Capital adequacy requirements; Zero lower bound; Global (search for similar items in EconPapers)
Pages: 36
Date: 2012-02-01
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Citations: View citations in EconPapers (9)

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