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Basel Accord and financial intermediation: the impact of policy

Martin Berka () and Christian Zimmermann ()

No 2011-042, Working Papers from Federal Reserve Bank of St. Louis

Abstract: This paper studies loan activity in a context where banks must follow Basel Accord-type rules and acquire financing from households. Loan activity typically decreases when entrepreneurs’ investment returns decline, and we study which type of policy could revigorate an economy in a trough. We find that active monetary policy increases loan volume even when the economy is in good shape; introducing active capital requirement policy can be effective as well if it implies tightening of regulation in bad times. This is performed with an heterogeneous agent economy with occupational choice, financial intermediation and aggregate shocks to the distribution of entrepreneurial returns.

Keywords: Basel capital accord; Intermediation (Finance) (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ban, nep-cba, nep-dge and nep-mac
Date: 2011
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Working Paper: Basel Accord and Financial Intermediation: The Impact of Policy (2012) Downloads
Working Paper: Basel Accord and Financial Intermediation: The Impact of Policy (2012) Downloads
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