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

Author

Listed:
  • Hibiki Ichiue
  • Jean-Guillaume Sahuc

    (EconomiX - EconomiX - UPN - Université Paris Nanterre - CNRS - Centre National de la Recherche Scientifique)

  • Yasin Mimir
  • Jolan Mohimont
  • Kalin Nikolov
  • Olivier de Bandt

    (EconomiX - EconomiX - UPN - Université Paris Nanterre - CNRS - Centre National de la Recherche Scientifique)

  • Sigrid Roehrs
  • Valério Scalone
  • Michael Straughan
  • Bora Durdu

Abstract

This paper (i) reviews the different channels of transmission of prudential policy highlighted in the literature and (ii) 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

  • Hibiki Ichiue & Jean-Guillaume Sahuc & Yasin Mimir & Jolan Mohimont & Kalin Nikolov & Olivier de Bandt & Sigrid Roehrs & Valério Scalone & Michael Straughan & Bora Durdu, 2022. "Assessing the Impact of Basel III: Evidence from Structural Macroeconomic Models," Working Papers hal-04159816, HAL.
    • Handle: RePEc:hal:wpaper:hal-04159816
    Note: View the original document on HAL open archive server: https://hal.science/hal-04159816
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    Cited by:

    1. is not listed on IDEAS
    2. Krenz, Johanna & Živanović, Jelena, 2024. "Macroprudential capital requirements, monetary policy, and financial crises," Economic Modelling, Elsevier, vol. 139(C).
    3. Aurélien Espic & Lisa Kerdelhu & Julien Matheron, 2024. "Capital Requirements in Light of Monetary Tightening," Working papers 947, Banque de France.

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    Keywords

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    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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