Monetary Policy with a touch of Basel

Ralph Chami and Thomas Cosimano

No 2001/151, IMF Working Papers from International Monetary Fund

Abstract: The typical portrait of monetary policy has the banks and the money supply being manipulated through changes in bank reserves. However, with only a small portion of bank deposits now subject to reserve requirements, an alternative explanation of how monetary policy influences banks is needed. Over the last decade, capital requirements have effectively replaced reserve requirements as the main constraint on the behavior of banks. This paper explores the implications of Basel capital requirements for monetary policy. In particular, we identify a "bank balance-sheet channel" of monetary policy, which operates through the impact on the money stock and the economy.

Keywords: WP; monetary policy; banking industry; capital requirements; capital constraint; loan rate; bank capital; accelerator effect; bank behavior; Loans; Deposit rates; Basel Core Principles; Bank credit; Capital adequacy requirements; Global (search for similar items in EconPapers)
Pages: 47
Date: 2001-10-01
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Citations: View citations in EconPapers (57)

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Journal Article: Monetary policy with a touch of Basel (2010)
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