MARC Record from University of Toronto

LEADER: 02235cam 2200253 a 4500
001 ocm61936428
005 20060206042224.0
008 051011s2005 dcua b i000 0 eng d
039 $frv
100 1 $aCatalán, Mario,$d1972-
245 10 $aCyclical implications of changing bank capital requirements in a macroeconomic framework /$cprepared by Mario Catalán and Eduardo J.J. Ganapolsky.
260 $aWashington, D.C. :$bInternational Monetary Fund, European Dept.,$cc2005.
300 $a35 p. :$bill. ;$c28 cm.
440 0 $aIMF working paper ;$vWP/05/168
500 $a"August 2005."
504 $aIncludes bibliographical references (p. 34-35).
530 $aAlso available on the World Wide Web.
520 $aThere is a widespread view that bank capital requirements should be loosened during recessions and tightened during expansions to avoid excessive credit and output swings. This view is based on a partial analysis that ignores the effects of capital requirement policies on the saving decisions of households, and, through this channel, on bank loans and output. We present an intertemporal general equilibrium framework that accounts for such effects and evaluate the optimal responses to loan supply and productivity (loan demand) shocks. In contrast to the standard view, we show that, when loan supply is reduced, increasing the capital requirement allows a faster recovery of households' savings, loans, and output than a flat capital requirement policy. When productivity (loan demand) is reduced, lowering the capital requirement facilitates households' dissaving and amplifies the output decline, but enhances welfare. Finally, we show that if productivity reductions are anticipated-rather than unanticipated-by regulators, lowering the capital requirement preemptively enhances welfare through greater intertemporal smoothing of households' consumption and deposit holdings.
650 0 $aBank capital$xEconometric models.
650 0 $aBusiness cycles$xEconometric models.
650 0 $aBank loans$xEconometric models.
700 1 $aGanapolsky, Eduardo J. J.
710 2 $aInternational Monetary Fund.$bEuropean Dept.
949 $aUN9..MF...6-2005I168$wLC$c1$i5750091-1001$lGOVPUBS$mDATAMAPGOV$rN$sY$tBOOK$u7/2/2006