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Assessing the Impact of Basel III: Evidence from Structural Macroeconomic Models

Author

Listed:
  • Olivier de Bandt
  • Bora Durdu
  • Hibiki Ichiue
  • Yasin Mimir
  • Jolan Mohimont
  • Kalin Nikolov
  • Sigrid Roehrs
  • Jean-Guillaume Sahuc
  • Valerio Scalone
  • Michael Straughan

Abstract

This paper reviews the different channels of transmission of prudential policy highlighted in the literature and provides a quantitative assessment of the impact of Basel III reforms using “off-the-shelf” DSGE models. It shows that the effects of regulation are positive on GDP whenever the costs and benefits of regulation are both introduced. However, this result may be associated with a temporary economic slowdown in the transition to Basel III, which can be accommodated by monetary policy. The assessment of liquidity requirements is still an area for research, as most models focus on costs, rather than on benefits, in particular in terms of lower contagion risk.

Suggested Citation

  • Olivier de Bandt & Bora Durdu & Hibiki Ichiue & Yasin Mimir & Jolan Mohimont & Kalin Nikolov & Sigrid Roehrs & Jean-Guillaume Sahuc & Valerio Scalone & Michael Straughan, 2022. "Assessing the Impact of Basel III: Evidence from Structural Macroeconomic Models," Working papers 864, Banque de France.
    • Handle: RePEc:bfr:banfra:864
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    More about this item

    Keywords

    Basel III Reforms; DSGE Models; Solvency Requirements; Liquidity Requirements;
    All these keywords.

    JEL classification:

    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • G01 - Financial Economics - - General - - - Financial Crises
    • 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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