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Media type:
E-Book;
Report
Title:
How Do Bank Capital and Capital Adequacy Regulation Affect the Monetary Transmission Mechanism?
Contributor:
Tanaka, Misa
[Author]
Published:
Munich: Center for Economic Studies and ifo Institute (CESifo), 2002
Language:
English
Origination:
Footnote:
Diese Datenquelle enthält auch Bestandsnachweise, die nicht zu einem Volltext führen.
Description:
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.