DO BANK CAPITAL REQUIREMENTS AMPLIFY BUSINESS CYCLES? BRIDGING THE GAP BETWEEN THEORY AND EMPIRICS
Aliaga-DÃaz, Roger and
Maria Olivero ()
Authors registered in the RePEc Author Service: Roger Aliaga-Diaz ()
Macroeconomic Dynamics, 2012, vol. 16, issue 3, 358-395
In this paper we study the role of bank capital adequacy requirements in the transmission of aggregate productivity shocks. We identify a gap between the empirical and the theoretical work that studies the â€œcredit crunchâ€ effects of these requirements, and how they can work as a financial accelerator that amplifies business cycles. This gap arises because the empirical work faces some difficulties in identifying the effects of capital requirements, whereas the theory still lacks a structural framework that can address these difficulties. We bridge that gap by providing a general equilibrium theoretical framework that allows us to study this financial accelerator. The main insight we obtain is that the â€œcredit crunchâ€ and financial accelerator effects are rather weak, which confirms the findings of existing empirical work. Additionally, by developing a structural framework, we are able to provide an explanation for this result.
References: Add references at CitEc
Citations: View citations in EconPapers (21) Track citations by RSS feed
Downloads: (external link)
https://www.cambridge.org/core/product/identifier/ ... type/journal_article link to article abstract page (text/html)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:cup:macdyn:v:16:y:2012:i:03:p:358-395_00
Access Statistics for this article
More articles in Macroeconomic Dynamics from Cambridge University Press Cambridge University Press, UPH, Shaftesbury Road, Cambridge CB2 8BS UK.
Bibliographic data for series maintained by Keith Waters ().