A MODEL OF BANK CAPITAL, LENDING AND THE MACROECONOMY: BASEL I VERSUS BASEL II*

Lea Zicchino ()

Manchester School, 2006, vol. 74, issue s1, 50-77

Abstract: The revised framework for capital regulation of internationally active banks (known as Basel II) introduces risk‐based capital requirements. This paper analyses the relationship between bank capital, lending and macroeconomic activity under the new capital adequacy regime. It extends a model of the bank capital channel of monetary policy—developed by Chami and Cosimano—by introducing capital constraints à la Basel II. The results suggest that bank capital is likely to be less variable under the new capital adequacy regime than under the current one, which is characterized by invariant asset risk‐weights. However, bank lending is likely to be more responsive to macroeconomic shocks.

Date: 2006
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (23)

Downloads: (external link)
https://doi.org/10.1111/j.1467-9957.2006.00517.x

Related works:
Working Paper: A model of bank capital, lending and the macroeconomy: Basel I versus Basel II (2005)
Working Paper: A model of bank capital, lending and the macro economy: Basel I versus Basel II (2005)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bla:manchs:v:74:y:2006:i:s1:p:50-77

Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=1463-6786

Access Statistics for this article

Manchester School is currently edited by Keith Blackburn

More articles in Manchester School from University of Manchester Contact information at EDIRC.
Bibliographic data for series maintained by Wiley Content Delivery ().