Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/210020
Authors: 
Akram, Q. Farooq
Year of Publication: 
2012
Series/Report no.: 
Working Paper No. 2012/21
Abstract: 
I investigate macro effects of higher bank capital requirements on the Norwegian economy and their use as a macroprudential policy instrument under Basel III. To this end, I develop a macroeconometric model where the capital adequacy ratio, lending rates, asset prices and credit interact with each other and with the real economy. The empirical results suggest that changes in capital requirements are primarily transmitted via lending rates to the other variables in the model. The proposed increases in capital requirements under Basel III are found to have significant effects especially on house prices and credit. I also derive optimal paths for the countercyclical capital buffer in response to various shocks. The buffer is found to equal its imposed ceiling of 2.5% in response to most of the shocks considered while its duration varies in the range of 1-12 quarters depending on the shock and its persistence.
Subjects: 
Basel III
capital requirements
macroprudential policy
JEL: 
C52
C53
E52
G38
Persistent Identifier of the first edition: 
ISBN: 
978-82-7553-709-4
Creative Commons License: 
https://creativecommons.org/licenses/by-nc-nd/4.0/deed.no
Document Type: 
Working Paper
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