Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/188885
Authors: 
Eickmeier, Sandra
Kolb, Benedikt
Prieto, Esteban
Year of Publication: 
2018
Series/Report no.: 
Bundesbank Discussion Paper 44/2018
Abstract: 
Bank capital regulations are intended to enhance financial stability in the long run, but may, in the meanwhile, involve costs for the real economy. To examine these costs we propose a narrative index of aggregate tightenings in regulatory US bank capital requirements from 1979 to 2008. Anticipation effects are explicitly taken into account and found to matter. In response to a tightening in capital requirements, banks temporarily reduce business and real estate lending, which temporarily lowers investment, consumption, housing activity and production. A decline in financial and macroeconomic risk helps sustain spending in the medium run. Monetary policy also cushions negative effects of capital requirement tightenings on the economy.
Subjects: 
Narrative Approach
Bank Capital Requirements
Local Projections
JEL: 
G28
G18
C32
E44
ISBN: 
978-3-95729-517-0
Document Type: 
Working Paper
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