Assessing the economy-wide impacts of strengthened bank capital requirements in Indonesia using a financial computable general equilibrium model

Arief Rasyid, Jason Nassios, Elizabeth Roos and James Giesecke

Applied Economics, 2022, vol. 54, issue 46, 5287-5304

Abstract: After the 2008 global financial crisis, authorities across the globe stressed the importance of equity capital to absorb losses. While many countries have raised bank capital adequacy requirements (CARs), the comprehensive impact assessment of this policy for emerging economies remains largely unexplored. We use a financial computable general equilibrium (FCGE) model of Indonesia called AMELIA-F to investigate the economy-wide impact of a 100 basis points increase in the CAR of Indonesian banks. Bank balance sheets contract as they move away from holding riskier assets, aiding macroeconomic stability. However, both non-housing and housing investment contract as banks pass on higher funding costs, driving long-run real GDP below baseline. As we discuss, debt-to-equity ratios for these sectors, and the economy-wide private debt to income ratio all fall, thus aiding long-run macroeconomic stability.

Date: 2022
References: Add references at CitEc
Citations:

Downloads: (external link)
http://hdl.handle.net/10.1080/00036846.2022.2042478 (text/html)
Access to full text is restricted to subscribers.

Related works:
Working Paper: Assessing the Economy-wide Impacts of Strengthened Bank Capital Requirement in Indonesia using a Financial-Computable General Equilibrium Model (2021)
Working Paper: Assessing the Economy-wide Impacts of Strengthened Bank Capital Requirements in Indonesia using a Financial Computable General Equilibrium Model (2021)
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:taf:applec:v:54:y:2022:i:46:p:5287-5304

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/RAEC20

DOI: 10.1080/00036846.2022.2042478

Access Statistics for this article

Applied Economics is currently edited by Anita Phillips

More articles in Applied Economics from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().