Robust design of countercyclical capital buffer rules

Dominik Hecker, Hun Jang, Margarita Rubio and Fabio Verona

No 2024/04, Discussion Papers from University of Nottingham, Centre for Finance, Credit and Macroeconomics (CFCM)

Abstract: In this paper, we design countercyclical capital buffer rules that perform robustly across a wide range of Dynamic Stochastic General Equilibrium (DSGE) models. These rules offer valuable guidance for policymakers uncertain about the most appropriate model(s) for decision-making. Our results show that robust rules call for a relatively restrained response from macroprudential authorities. The cost of insuring against model uncertainty is moderate, emphasizing the practicality of following these robust countercyclical capital buffer rules in uncertain economic environments. Keywords:

Keywords: countercyclical capital buffers; macroprudential policy; model comparison; structural models; model uncertainty; robust rule (search for similar items in EconPapers)
Date: 2024
New Economics Papers: this item is included in nep-cba, nep-dge and nep-fdg
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https://www.nottingham.ac.uk/cfcm/documents/papers/2024/24-04.pdf (application/pdf)

Related works:
Working Paper: Robust design of countercyclical capital buffer rules (2024)
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Persistent link: https://EconPapers.repec.org/RePEc:not:notcfc:2024/04

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