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Bank Capital Regulation, Economic Stability, and Monetary Policy: What Does the Academic Literature Tell Us?

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  • David VanHoose

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Abstract

This paper surveys academic research exploring the macroeconomic and monetary policy implications of the Basel I and Basel II systems of risk-based capital requirements. This research indicates that regulatory tightening of capital ratios can generate aggregate shocks, that capital regulation can enhance the procyclicality already inherent in banking, and that capital requirements can influence macroeconomic outcomes and alter the monetary policy transmission mechanism. The paper offers suggestions for future avenues of research on the interplay between bank capital regulation, the economy, and monetary policymaking. Copyright International Atlantic Economic Society 2008

Suggested Citation

  • David VanHoose, 2008. "Bank Capital Regulation, Economic Stability, and Monetary Policy: What Does the Academic Literature Tell Us?," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 36(1), pages 1-14, March.
  • Handle: RePEc:kap:atlecj:v:36:y:2008:i:1:p:1-14
    DOI: 10.1007/s11293-007-9100-z
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    References listed on IDEAS

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    Cited by:

    1. Aiyar, Shekhar & Calomiris, Charles W. & Hooley, John & Korniyenko, Yevgeniya & Wieladek, Tomasz, 2014. "The international transmission of bank capital requirements: Evidence from the UK," Journal of Financial Economics, Elsevier, vol. 113(3), pages 368-382.
    2. Gregory deWalque & Olivier Pierrard & Abdelaziz Rouabah, 2010. "Financial (In)Stability, Supervision and Liquidity Injections: A Dynamic General Equilibrium Approach," Economic Journal, Royal Economic Society, vol. 120(549), pages 1234-1261, December.
    3. Chami, Ralph & Cosimano, Thomas F., 2010. "Monetary policy with a touch of Basel," Journal of Economics and Business, Elsevier, vol. 62(3), pages 161-175, May.
    4. Song, Joonhyuk & Ryu, Doojin, 2016. "Credit cycle and balancing the capital gap: Evidence from Korea," Economic Systems, Elsevier, vol. 40(4), pages 595-611.
    5. Athanasoglou, Panayiotis P. & Daniilidis, Ioannis & Delis, Manthos D., 2014. "Bank procyclicality and output: Issues and policies," Journal of Economics and Business, Elsevier, vol. 72(C), pages 58-83.
    6. Eva Schliephake & Roland Kirstein, 2013. "Strategic Effects of Regulatory Capital Requirements in Imperfect Banking Competition," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 45(4), pages 675-700, June.
    7. Francois Boutin-Dufresne & Santiago Peña & Oral Williams & Tomasz A. Zawisza, 2013. "Benchmarking Banking Sector Efficiency Across Regional Blocks in Sub-Saharan Africa; What Room for Policy?," IMF Working Papers 13/51, International Monetary Fund.
    8. Deli, Yota D. & Hasan, Iftekhar, 2017. "Real effects of bank capital regulations: Global evidence," Journal of Banking & Finance, Elsevier, vol. 82(C), pages 217-228.
    9. Serafín Frache & Javier García-Cicco & Jorge Ponce, 2017. "Countercyclical Prudential Tools in an Estimated DSGE Model," Documentos de Trabajo (working papers) 0917, Department of Economics - dECON.
    10. Kazeem O. Salaam, 2015. "Procyclicality Effects on Bank Lending Decisions: A Case Study of the British Banking Sector," International Journal of Academic Research in Accounting, Finance and Management Sciences, Human Resource Management Academic Research Society, International Journal of Academic Research in Accounting, Finance and Management Sciences, vol. 5(2), pages 185-194, April.
    11. Jokipii, Terhi & Milne, Alistair, 2011. "Bank capital buffer and risk adjustment decisions," Journal of Financial Stability, Elsevier, vol. 7(3), pages 165-178, August.
    12. Adela Socol, 2011. "Internal Banking Control And Audit: A Comparative Approach In The Romanian Banking Sector," Annales Universitatis Apulensis Series Oeconomica, Faculty of Sciences, "1 Decembrie 1918" University, Alba Iulia, vol. 2(13), pages 1-22.
    13. repec:eee:jbfina:v:87:y:2018:i:c:p:87-101 is not listed on IDEAS
    14. Hans Degryse & Sanja Jakovljević & Steven Ongena, 2015. "A Review of Empirical Research on the Design and Impact of Regulation in the Banking Sector," Annual Review of Financial Economics, Annual Reviews, vol. 7(1), pages 423-443, December.

    More about this item

    Keywords

    Bank capital regulation; E51; G28;

    JEL classification:

    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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