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.
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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number
17306.
Length: Date of creation: Jul 2008 Date of revision: Publication status: Published in Indian Economic Review 2.43(2008): pp. 205-338 Handle: RePEc:pra:mprapa:17306
Find related papers by JEL classification: E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Mortgages
References listed on IDEAS Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
Anil K. Kashyap & Jeremy C. Stein, 1994.
"Monetary Policy and Bank Lending,"
NBER Chapters,
in: Monetary Policy, pages 221-261
National Bureau of Economic Research, Inc.
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