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The Effect of Capital Requirement Regulation on the Transmission of Monetary Policy: Evidence from Austria

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  • Philipp Engler,Terhi Jokipii,Christian Merkl
  • Pablo Rovira Kaltwasser,Lúcio Vinhas de Souza

Abstract

This paper investigates the existence of a bank lending and a bank capital channel in Austria by applying the dynamic Arellano-Bond GMM-estimator to a quarterly bank level dataset spanning from 1997 to 2003. While we do find evidence that the bank lending channel is in existence, with an important role active for capitalization, we are unable to confirm that the bank capital channel is in force in Austria. Our results indicate some counter-cyclicality in lending activity, a finding that is in line with the existing Austrian literature. Classification-

Suggested Citation

  • Philipp Engler,Terhi Jokipii,Christian Merkl & Pablo Rovira Kaltwasser,Lúcio Vinhas de Souza, 2005. "The Effect of Capital Requirement Regulation on the Transmission of Monetary Policy: Evidence from Austria," The Institute for International Integration Studies Discussion Paper Series iiisdp066, IIIS.
    • Handle: RePEc:iis:dispap:iiisdp066
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    1. Christian Merkl & Stephanie Stolz, 2009. "Banks' regulatory buffers, liquidity networks and monetary policy transmission," Applied Economics, Taylor & Francis Journals, vol. 41(16), pages 2013-2024.
    2. Philipp Engler & Terhi Jokipii & Christian Merkl & Pablo Rovira Kaltwasser & Lúcio Vinhas de Souza, 2007. "The effect of capital requirement regulation on the transmission of monetary policy: evidence from Austria," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 34(5), pages 411-425, December.
    3. Heid, Frank & Porath, Daniel & Stolz, Stéphanie, 2003. "Does capital regulation matter for bank behavior? Evidence for German savings banks," Kiel Working Papers 1192, Kiel Institute for the World Economy (IfW Kiel).
    4. Ben S. Bernanke & Mark Gertler, 1995. "Inside the Black Box: The Credit Channel of Monetary Policy Transmission," Journal of Economic Perspectives, American Economic Association, vol. 9(4), pages 27-48, Fall.
    5. Michael Ehrmann & Andreas Worms, 2004. "Bank Networks and Monetary Policy Transmission," Journal of the European Economic Association, MIT Press, vol. 2(6), pages 1148-1171, December.
    6. Kishan, Ruby P & Opiela, Timothy P, 2000. "Bank Size, Bank Capital, and the Bank Lending Channel," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 32(1), pages 121-141, February.
    7. Goodfriend, Marvin & McCallum, Bennett T., 2007. "Banking and interest rates in monetary policy analysis: A quantitative exploration," Journal of Monetary Economics, Elsevier, vol. 54(5), pages 1480-1507, July.
    8. Angeloni,Ignazio & Kashyap,Anil K. & Mojon,Benoît (ed.), 2003. "Monetary Policy Transmission in the Euro Area," Cambridge Books, Cambridge University Press, number 9780521828642, September.
    9. repec:onb:oenbwp:y::i:99:b:1 is not listed on IDEAS
    10. Leonardo Gambacorta & Paolo Emilio Mistrulli, 2003. "Bank Capital and Lending Behaviour: Empirical Evidence for Italy," Temi di discussione (Economic working papers) 486, Bank of Italy, Economic Research and International Relations Area.
    11. Kashyap, Anil K. & Mojon, Benoît & Terlizzese, Daniele & Backé, Peter, 2002. "Monetary Transmission in the Euro Area : Where Do We Stand?," Working Paper Series 114, European Central Bank.
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    Cited by:

    1. Philipp Engler & Terhi Jokipii & Christian Merkl & Pablo Rovira Kaltwasser & Lúcio Vinhas de Souza, 2007. "The effect of capital requirement regulation on the transmission of monetary policy: evidence from Austria," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 34(5), pages 411-425, December.
    2. Christian Merkl & Stephanie Stolz, 2009. "Banks' regulatory buffers, liquidity networks and monetary policy transmission," Applied Economics, Taylor & Francis Journals, vol. 41(16), pages 2013-2024.
    3. Budnik, Katarzyna & Bochmann, Paul, 2017. "Capital and liquidity buffers and the resilience of the banking system in the euro area," Working Paper Series 2120, European Central Bank.
    4. Burgstaller Johann, 2010. "Bank Lending and Monetary Policy Transmission in Austria," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 230(2), pages 163-185, April.
    5. de Souza, Lucio Vinhas, 2006. "Beyond the euro area: An introduction," Research in International Business and Finance, Elsevier, vol. 20(2), pages 127-130, June.

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    More about this item

    JEL classification:

    • E4 - Macroeconomics and Monetary Economics - - Money and Interest Rates
    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit

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