EconPapers    
Economics at your fingertips  
 

Capital Requirements and Business Cycles with Credit Market Imperfections

Pierre-Richard Agénor (), Koray Alper and Luiz Awazu Pereira da Silva ()

Centre for Growth and Business Cycle Research Discussion Paper Series from Economics, The University of Manchester

Abstract: The business cycle effects of bank capital regulatory regimes are examined in a New Keynesian model with credit market imperfections and a cost channel of monetary policy. A key feature of the model is that bank capital increases incentives for banks to monitor borrowers, thereby reducing the probability of default. Basel I- and Basel II-type regulatory regimes are defined, and the model is calibrated for a middle-income country. Numerical simulations show that, depending on the elasticities that relate the repayment probability to its micro and macro determinants, and the elasticity of the risk weight (under Basel II) with respect to the repayment probability, Basel I may be more procyclical than Basel II in response to adverse supply and demand shocks.

Pages: 57 pages
Date: 2009
New Economics Papers: this item is included in nep-ban, nep-bec, nep-mac, nep-reg and nep-rmg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6) Track citations by RSS feed

Downloads: (external link)
http://hummedia.manchester.ac.uk/schools/soss/cgbc ... apers/dpcgbcr124.pdf (application/pdf)

Related works:
Journal Article: Capital requirements and business cycles with credit market imperfections (2012) Downloads
Working Paper: Capital Requirements and Business Cycles with Credit Market Imperfections (2011) Downloads
Working Paper: Capital requirements and business cycles with credit market imperfections (2009) Downloads
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:man:cgbcrp:124

Access Statistics for this paper

More papers in Centre for Growth and Business Cycle Research Discussion Paper Series from Economics, The University of Manchester Contact information at EDIRC.
Bibliographic data for series maintained by Marianne Sensier ().

 
Page updated 2021-06-12
Handle: RePEc:man:cgbcrp:124