IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

How Do Bank Capital and Capital Adequacy Regulation Affect the Monetary Transmission Mechanism?

  • Misa Tanaka

This paper analyzes the effect of bank capital adequacy regulation on the monetary transmission mechanism. Using a general equilibrium framework and a representative bank, the model demonstrates that the monetary transmission mechanism is weakened if banks are poorly capitalized, or if the capital adequacy requirement is stringent. The paper also assesses the impact of the New Basel Accord (Basel II), and argues that a rise in credit risk may lead to a sharper loan contraction under this new regime. Moreover, it predicts that Basel II may reduce the effectiveness of monetary policy as a tool for stimulating output during recessions.

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: http://www.cesifo-group.de/portal/page/portal/DocBase_Content/WP/WP-CESifo_Working_Papers/wp-cesifo-2002/wp-cesifo-2002-10/cesifo_wp799.pdf
Download Restriction: no

Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 799.

as
in new window

Length:
Date of creation: 2002
Date of revision:
Handle: RePEc:ces:ceswps:_799
Contact details of provider: Postal: Poschingerstrasse 5, 81679 Munich
Phone: +49 (89) 9224-0
Fax: +49 (89) 985369
Web page: http://www.cesifo.deEmail:


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. Ben S. Bernanke & Alan S. Blinder, 1988. "Credit, Money, and Aggregate Demand," NBER Working Papers 2534, National Bureau of Economic Research, Inc.
  2. Anil K Kashyap & Jeremy C. Stein & David W. Wilcox, 1992. "Monetary Policy and Credit Conditions: Evidence From the Composition of External Finance," NBER Working Papers 4015, National Bureau of Economic Research, Inc.
  3. Blum, Jurg & Hellwig, Martin, 1995. "The macroeconomic implications of capital adequacy requirements for banks," European Economic Review, Elsevier, vol. 39(3-4), pages 739-749, April.
  4. Joe Peek & Eric S. Rosengren, 1996. "The international transmission of financial shocks: the case of Japan," Working Papers 96-1, Federal Reserve Bank of Boston.
  5. Hoshi, Takeo & Kashyap, Anil & Scharfstein, David, 1991. "Corporate Structure, Liquidity, and Investment: Evidence from Japanese Industrial Groups," The Quarterly Journal of Economics, MIT Press, vol. 106(1), pages 33-60, February.
  6. Diamond, Douglas W, 1991. "Monitoring and Reputation: The Choice between Bank Loans and Directly Placed Debt," Journal of Political Economy, University of Chicago Press, vol. 99(4), pages 689-721, August.
  7. Peek, Joe & Rosengren, Eric, 1995. "Bank regulation and the credit crunch," Journal of Banking & Finance, Elsevier, vol. 19(3-4), pages 679-692, June.
  8. G. Choi, 2000. "The Macroeconomic Implications of Regulatory Capital Adequacy Requirements for Korean Banks," Economic Notes, Banca Monte dei Paschi di Siena SpA, vol. 29(1), pages 111-143, 02.
  9. Patrick Bolton & Xavier Freixas, 2000. "Corporate finance and the monetary transmission mechanism," Economics Working Papers 511, Department of Economics and Business, Universitat Pompeu Fabra.
  10. Toshitaka Sekine, 1999. "Firm Investment and Balance-Sheet Problems in Japan," IMF Working Papers 99/111, International Monetary Fund.
  11. 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.
  12. Skander Van den Heuvel, 2006. "The Bank Capital Channel of Monetary Policy," 2006 Meeting Papers 512, Society for Economic Dynamics.
  13. Ben S. Bernanke & Cara S. Lown, 1991. "The Credit Crunch," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 22(2), pages 205-248.
  14. Douglas W. Diamond & Raghuram G. Rajan, . "A Theory of Bank Capital," CRSP working papers 363, Center for Research in Security Prices, Graduate School of Business, University of Chicago.
  15. Gibson, Michael S, 1995. "Can Bank Health Affect Investment? Evidence from Japan," The Journal of Business, University of Chicago Press, vol. 68(3), pages 281-308, July.
  16. Takeo Hoshi & Anil Kashyap, 2000. "The Japanese Banking Crisis: Where Did It Come From and How Will It End?," NBER Chapters, in: NBER Macroeconomics Annual 1999, Volume 14, pages 129-212 National Bureau of Economic Research, Inc.
  17. Stephen D. Oliner & Glenn D. Rudebusch, 1995. "Is there a bank lending channel for monetary policy?," Economic Review, Federal Reserve Bank of San Francisco, pages 1-20.
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:ces:ceswps:_799. 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: (Julio Saavedra)

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.