Capital requirements, bank behavior and monetary policy: A theoretical analysis with an empirical application to India

Saibal Ghosh

MPRA Paper from University Library of Munich, Germany

Abstract: The paper addresses the issue of monetary policy transmission through the banking sector in the presence of a bank capital regulation. A model of bank behavior is presented, which shows how a monetary policy shock affects both deposit and lending, in the short run (when equity capital is assumed to be fixed) as well as in the long run (when equity is endogenous). The analysis is extended to incorporate a salient feature of Basel II incorporating loans with differential risk weights. The findings are contrasted with those obtained under the 1988 Accord and the implications of the analysis are explored.

Keywords: Basel Accord; Bank equity; Credit risk; Monetary policy (search for similar items in EconPapers)
JEL-codes: E52 G21 (search for similar items in EconPapers)
Date: 2008-07
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (11)

Published in Indian Economic Review 2.43(2008): pp. 205-338

Downloads: (external link)
https://mpra.ub.uni-muenchen.de/17306/1/MPRA_paper_17306.pdf original version (application/pdf)

Related works:
Journal Article: Capital requirements, bank behavior and monetary policy: A theoretical analysis with an empirical application to India (2008)
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:pra:mprapa:17306

Access Statistics for this paper

More papers in MPRA Paper from University Library of Munich, Germany Ludwigstraße 33, D-80539 Munich, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Joachim Winter ().