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The Macroeconomic Implications of the New Basel Accord

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  • Misa Tanaka

Abstract

This paper assesses the macroeconomic implications of Basel II in light of recent development in the literature. It argues that although Basel II is likely to strengthen banks' incentives to control their risk-taking, it may reduce credit supply to certain borrowers, such as small- and medium-sized enterprises (SMEs) and firms based in developing countries. Furthermore, Basel II may increase procyclical fluctuation of bank loans while weakening the monetary transmission mechanism during recessions. A widespread adoption of the "through-the-cycle" risk models may mitigate these problems, but not completely eliminate them. This paper also considers whether monetary policy can be used to counter effectively the procyclicality problem inherent in Basel II. (JEL E52, G21, G28)

Suggested Citation

  • Misa Tanaka, 2003. "The Macroeconomic Implications of the New Basel Accord," CESifo Economic Studies, CESifo Group, vol. 49(2), pages 217-232.
    • Handle: RePEc:oup:cesifo:v:49:y:2003:i:2:p:217-232.
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    File URL: http://hdl.handle.net/10.1093/cesifo/49.2.217
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    Citations

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    Cited by:

    1. Ines Drumond, 2009. "Bank Capital Requirements, Business Cycle Fluctuations And The Basel Accords: A Synthesis," Journal of Economic Surveys, Wiley Blackwell, vol. 23(5), pages 798-830, December.
    2. Ciarán mac an Bhaird & Brian Lucey, 2010. "Determinants of capital structure in Irish SMEs," Small Business Economics, Springer, vol. 35(3), pages 357-375, October.
    3. Mario Mustilli & Francesco Campanella & Eugenio D’Angelo, 2017. "Basel III and Credit Crunch: An Empirical Test with Focus on Europe," Journal of Applied Finance & Banking, SCIENPRESS Ltd, vol. 7(3), pages 1-3.

    More about this item

    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; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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