Macroeconomic Effects of Introducing a Capital Conservation Buffer in the Ukrainian Banking Sector

Pervin Dadashova (), Magnus Jonsson () and Hanna Onyshchenko ()
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Pervin Dadashova: National Bank of Ukraine, National University of “Kyiv-Mohyla Academy”
Magnus Jonsson: Sveriges Riksbank
Hanna Onyshchenko: National Bank of Ukraine

Visnyk of the National Bank of Ukraine, 2018, issue 243, 33-42

Abstract: The National Bank of Ukraine (NBU) is planning to introduce a capital conservation buffer in the Ukrainian banking sector over a four-year period starting in 2020. This new regulation will yield long-term benefits by strengthening the resilience of the banks, which will reduce the likelihood and costs of financial crises. However, higher capital requirements in the form of a capital conservation buffer can also result in short-term costs by temporarily lowering output. In this study, we use a dynamic general equilibrium model calibrated to fit some long-term features of the Ukrainian economy to evaluate how different implementation strategies affect the short-term output loss. We show that the output loss can be reduced by preannouncing and gradually implementing the buffer, along the lines that have already been advanced by the NBU.

Keywords: Capital buffers; DSGE models; banks; macroeconomic costs; macroprudential policy; Ukraine (search for similar items in EconPapers)
JEL-codes: E17 E58 G21 (search for similar items in EconPapers)
Date: 2018
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Persistent link: https://EconPapers.repec.org/RePEc:ukb:journl:y:2018:i:243:p:33-42

DOI: 10.26531/vnbu2018.243.031

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