IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Log in (now much improved!) to save this article

Macroprudential capital tools: assessing their rationale and effectiveness

Listed author(s):
  • Clerc, L.
  • Nikolov, K.
  • Derviz, A.
  • Stracca, L.
  • Mendicino, C.
  • Suarez, J.
  • Moyen, S.
  • Vardoulakis, A.

In this paper, the authors analyse the rationale for and effectiveness of macroprudential capital tools. They first present the limits of the traditional approach to bank capital regulation and the reasons why developing a more holistic approach is deemed appropriate. They then assess the effectiveness of capital tools (namely capital requirements, countercyclical capital buffers and sectoral risk weights) from a macroprudential perspective in the context of a dynamic general equilibrium model that features the default of the various classes of borrowers (banks, households and firms). Three main results stand out from this exercise: (i) there is generally an optimal level of capital requirements; (ii) the lower the banks’ capital ratio (or the higher their leverage), the greater the scope for amplification of real and financial shocks; (iii) a moderate degree of countercyclical adjustment of capital requirements may significantly improve the benefits of setting these requirements at a high level.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: https://publications.banque-france.fr/sites/default/files/medias/documents/financial-stability-review-18_2014-04.pdf
Download Restriction: no

Article provided by Banque de France in its journal Financial Stability Review.

Volume (Year): (2014)
Issue (Month): 18 (April)
Pages: 183-194

as
in new window

Handle: RePEc:bfr:fisrev:2014:18:18
Contact details of provider: Postal:
Banque de France 31 Rue Croix des Petits Champs LABOLOG - 49-1404 75049 PARIS

Web page: http://www.banque-france.fr/

More information through EDIRC

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.:

as
in new window


  1. Clerc, L. & Gabrieli, S. & Kern, S. & El Omari, Y., 2014. "Monitoring the European CDS Market through Networks: Implications for Contagion Risks," Working papers 477, Banque de France.
  2. David Miles & Jing Yang & Gilberto Marcheggiano, 2013. "Optimal Bank Capital," Economic Journal, Royal Economic Society, vol. 123(567), pages 1-37, 03.
  3. Rafael Repullo & Javier Suarez, 2013. "The Procyclical Effects of Bank Capital Regulation," Review of Financial Studies, Society for Financial Studies, vol. 26(2), pages 452-490.
  4. Anat R. Admati & Peter M. DeMarzo & Martin F. Hellwig & Paul Pfleiderer, 2010. "Fallacies, Irrelevant Facts, and Myths in the Discussion of Capital Regulation: Why Bank Equity is Not Expensive," Working Paper Series of the Max Planck Institute for Research on Collective Goods 2010_42, Max Planck Institute for Research on Collective Goods.
  5. Laurent Clerc & Alexis Derviz & Caterina Mendicino & Stephane Moyen & Kalin Nikolov & Livio Stracca & Javier Suarez & Alexandros P. Vardoulakis, 2015. "Capital Regulation in a Macroeconomic Model with Three Layers of Default," International Journal of Central Banking, International Journal of Central Banking, vol. 11(3), pages 9-63, June.
  6. Gertler, Mark & Karadi, Peter, 2011. "A model of unconventional monetary policy," Journal of Monetary Economics, Elsevier, vol. 58(1), pages 17-34, January.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:bfr:fisrev:2014:18:18. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Michael brassart)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.