EconPapers    
Economics at your fingertips  
 

How Do Bank Capital and Capital Adequacy Regulation Affect the Monetary Transmission Mechanism?

Misa Tanaka

No 799, CESifo Working Paper Series from CESifo

Abstract: This paper analyzes the effect of bank capital adequacy regulation on the monetary transmission mechanism. Using a general equilibrium framework and a representative bank, the model demonstrates that the monetary transmission mechanism is weakened if banks are poorly capitalized, or if the capital adequacy requirement is stringent. The paper also assesses the impact of the New Basel Accord (Basel II), and argues that a rise in credit risk may lead to a sharper loan contraction under this new regime. Moreover, it predicts that Basel II may reduce the effectiveness of monetary policy as a tool for stimulating output during recessions.

Date: 2002
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (22)

Downloads: (external link)
https://www.cesifo.org/DocDL/cesifo_wp799.pdf (application/pdf)

Related works:
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:ces:ceswps:_799

Access Statistics for this paper

More papers in CESifo Working Paper Series from CESifo Contact information at EDIRC.
Bibliographic data for series maintained by Klaus Wohlrabe ().

 
Page updated 2025-03-19
Handle: RePEc:ces:ceswps:_799