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Basel III: Long-term Impact on Economic Performance and Fluctuations

Author

Listed:
  • Paolo Angelini
  • Laurent Clerc
  • Vasco Cúrdia
  • Leonardo Gambacorta
  • Andrea Gerali
  • Alberto Locarno
  • Roberto Motto
  • Werner Roeger
  • Skander Van den Heuvel
  • Jan Vlček

Abstract

type="main"> Using a wide range of macroeconomic and econometric models we assess the long-term economic impact of the Basel III reform. Our main results are the following. (1) The economic costs of the new regulatory standards for bank capital and liquidity are considerably below existing estimates of the benefits that the reform should have by reducing the probability of banking crises (Basel Committee on Banking Supervision (2010) ‘An Assessment of the Long-term Impact of Stronger Capital and Liquidity Requirements’, Basel). (2) The reform dampens output volatility modestly, although there is some heterogeneity across models. (3) The adoption of countercyclical capital buffers can substantially amplify the dampening effect on output volatility.

Suggested Citation

  • Paolo Angelini & Laurent Clerc & Vasco Cúrdia & Leonardo Gambacorta & Andrea Gerali & Alberto Locarno & Roberto Motto & Werner Roeger & Skander Van den Heuvel & Jan Vlček, 2015. "Basel III: Long-term Impact on Economic Performance and Fluctuations," Manchester School, University of Manchester, vol. 83(2), pages 217-251, March.
  • Handle: RePEc:bla:manchs:v:83:y:2015:i:2:p:217-251
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    File URL: http://hdl.handle.net/10.1111/manc.12056
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    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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