Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/244272 
Year of Publication: 
2021
Series/Report no.: 
ESRB Working Paper Series No. 120
Publisher: 
European Systemic Risk Board (ESRB), European System of Financial Supervision, Frankfurt a. M.
Abstract: 
What are the quantitative macroeconomic effects of the countercyclical capital buffer (CCyB)? I study this question in a nonlinear DSGE model with occasional financial crises, which is calibrated and combined with US data to estimate sequences of structural shocks. Raising capital buffers during leverage expansions can reduce the frequency of crises by more than half. A quantitative application to the 2007-08 financial crisis shows that the CCyB in the 2:5% range (as in the Federal Reserve's current framework) could have greatly mitigated the financial panic of 2008, for a cumulative gain of 29% in aggregate consumption. The threat of raising capital requirements is effective even if this tool is not used in equilibrium.
Subjects: 
countercyclical capital buffer
nancial crises
macroprudential policy
JEL: 
E4
E6
G2
Persistent Identifier of the first edition: 
ISBN: 
978-92-899-4623-0
Document Type: 
Working Paper

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