The new financial regulation in Basel III and monetary policy: a macroprudential approach
The aim of this paper is to study the interaction between Basel I, II and III regulations with monetary policy. In order to do that, we use a dynamic stochastic general equilibrium (DSGE) model with a housing market, banks, borrowers, and savers. Results show that monetary policy needs to be more ag...
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| Format: | Article |
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Elsevier
2016
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| Online Access: | https://eprints.nottingham.ac.uk/30671/ |
| _version_ | 1848794034536972288 |
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| author | Rubio, Margarita Carrasco-Gallego, José A. |
| author_facet | Rubio, Margarita Carrasco-Gallego, José A. |
| author_sort | Rubio, Margarita |
| building | Nottingham Research Data Repository |
| collection | Online Access |
| description | The aim of this paper is to study the interaction between Basel I, II and III regulations with monetary policy. In order to do that, we use a dynamic stochastic general equilibrium (DSGE) model with a housing market, banks, borrowers, and savers. Results show that monetary policy needs to be more aggressive when the capital requirement ratio (CRR) increases because the money multiplier decreases. However, this policy combination brings a more stable economic and financial system. We also analyze the optimal way to implement the countercyclical capital buffer stated by Basel III. We propose that the CRR follows a rule that responds to deviations of credit from its steady state. We find that the optimal implementation of this macroprudential rule together with monetary policy brings extra financial stability with respect to Basel I and II. |
| first_indexed | 2025-11-14T19:09:47Z |
| format | Article |
| id | nottingham-30671 |
| institution | University of Nottingham Malaysia Campus |
| institution_category | Local University |
| last_indexed | 2025-11-14T19:09:47Z |
| publishDate | 2016 |
| publisher | Elsevier |
| recordtype | eprints |
| repository_type | Digital Repository |
| spelling | nottingham-306712020-05-04T20:00:53Z https://eprints.nottingham.ac.uk/30671/ The new financial regulation in Basel III and monetary policy: a macroprudential approach Rubio, Margarita Carrasco-Gallego, José A. The aim of this paper is to study the interaction between Basel I, II and III regulations with monetary policy. In order to do that, we use a dynamic stochastic general equilibrium (DSGE) model with a housing market, banks, borrowers, and savers. Results show that monetary policy needs to be more aggressive when the capital requirement ratio (CRR) increases because the money multiplier decreases. However, this policy combination brings a more stable economic and financial system. We also analyze the optimal way to implement the countercyclical capital buffer stated by Basel III. We propose that the CRR follows a rule that responds to deviations of credit from its steady state. We find that the optimal implementation of this macroprudential rule together with monetary policy brings extra financial stability with respect to Basel I and II. Elsevier 2016-10 Article PeerReviewed Rubio, Margarita and Carrasco-Gallego, José A. (2016) The new financial regulation in Basel III and monetary policy: a macroprudential approach. Journal of Financial Stability, 26 . pp. 294-305. ISSN 1572-3089 Basel I Basel II Basel III Countercyclical capital buffer Macroprudential Capital requirement ratio Credit Borrowers Savers Banks http://www.sciencedirect.com/science/article/pii/S1572308916300651 doi:10.1016/j.jfs.2016.07.012 doi:10.1016/j.jfs.2016.07.012 |
| spellingShingle | Basel I Basel II Basel III Countercyclical capital buffer Macroprudential Capital requirement ratio Credit Borrowers Savers Banks Rubio, Margarita Carrasco-Gallego, José A. The new financial regulation in Basel III and monetary policy: a macroprudential approach |
| title | The new financial regulation in Basel III and monetary policy: a macroprudential approach |
| title_full | The new financial regulation in Basel III and monetary policy: a macroprudential approach |
| title_fullStr | The new financial regulation in Basel III and monetary policy: a macroprudential approach |
| title_full_unstemmed | The new financial regulation in Basel III and monetary policy: a macroprudential approach |
| title_short | The new financial regulation in Basel III and monetary policy: a macroprudential approach |
| title_sort | new financial regulation in basel iii and monetary policy: a macroprudential approach |
| topic | Basel I Basel II Basel III Countercyclical capital buffer Macroprudential Capital requirement ratio Credit Borrowers Savers Banks |
| url | https://eprints.nottingham.ac.uk/30671/ https://eprints.nottingham.ac.uk/30671/ https://eprints.nottingham.ac.uk/30671/ |