Understanding the specific features of the CCyB and the SCCyB − evidence from the 3D DSGE model

Nadya Wildmann and Mara Pirovano

Macroprudential Bulletin, 2019, vol. 8

Abstract: As discussions progress on the potential design of sectoral capital buffers both at the Basel Committee on Banking Supervision (BCBS) and European levels, this article discusses the advantages and shortcomings of the sectoral application of the countercyclical capital buffer for addressing sectoral systemic risks. A dynamic stochastic general equilibrium (DGSE) model is used to explore and compare the transmission channels of the countercyclical capital buffer (CCyB) and the sectoral countercyclical capital buffer (SCCyB), as well as their role in enhancing the resilience of banks and taming the procyclicality of credit. The model-based policy exercise indicates that, if risks are confined to one particular credit sector, a SCCyB could prove more effective than the CCyB in strengthening bank resilience to the target sector and in mitigating sectoral credit imbalances. JEL Classification: C68, E58, G01, G21, G28

Keywords: macroprudential policy; sectoral capital buffers; sectoral systemic risks (search for similar items in EconPapers)
Date: 2019-09
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