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A Model Of Bank Capital Lending And The Macroeconomy
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Book Synopsis A Model of Bank Capital, Lending and the Macroeconomy by : Lea Zicchino
Download or read book A Model of Bank Capital, Lending and the Macroeconomy written by Lea Zicchino and published by . This book was released on 2007 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: The revised framework for capital regulation of internationally active banks (known as Basel II) introduces risk-based capital requirements. This paper analyses the relationship between bank capital, lending and macroeconomic activity under the new capital adequacy regime. It extends a model of the bank capital channel of monetary policy - developed by Chami and Cosimano - by introducing capital constraints a la Basel II. The results suggest that bank capital is likely to be less variable under the new capital adequacy regime than under the current one, which is characterized by invariant asset risk-weights. However, bank lending is likely to be more responsive to macroeconomic shocks.
Book Synopsis Effects of Bank Capital on Lending by : Joseph M. Berrospide
Download or read book Effects of Bank Capital on Lending written by Joseph M. Berrospide and published by DIANE Publishing. This book was released on 2011-04 with total page 50 pages. Available in PDF, EPUB and Kindle. Book excerpt: The effect of bank capital on lending is a critical determinant of the linkage between financial conditions and real activity, and has received especial attention in the recent financial crisis. The authors use panel-regression techniques to study the lending of large bank holding companies (BHCs) and find small effects of capital on lending. They then consider the effect of capital ratios on lending using a variant of Lown and Morgan's VAR model, and again find modest effects of bank capital ratio changes on lending. The authors¿ estimated models are then used to understand recent developments in bank lending and, in particular, to consider the role of TARP-related capital injections in affecting these developments. Illus. A print on demand pub.
Book Synopsis Bank Lending in the Knowledge Economy by : Mr.Giovanni Dell'Ariccia
Download or read book Bank Lending in the Knowledge Economy written by Mr.Giovanni Dell'Ariccia and published by International Monetary Fund. This book was released on 2017-11-07 with total page 45 pages. Available in PDF, EPUB and Kindle. Book excerpt: We study bank portfolio allocations during the transition of the real sector to a knowledge economy in which firms use less tangible capital and invest more in intangible assets. We show that, as firms shift toward intangible assets that have lower collateral values, banks reallocate their portfolios away from commercial loans toward other assets, primarily residential real estate loans and liquid assets. This effect is more pronounced for large and less well capitalized banks and is robust to controlling for real estate loan demand. Our results suggest that increased firm investment in intangible assets can explain up to 20% of bank portfolio reallocation from commercial to residential lending over the last four decades.
Book Synopsis Bank Capital and Lending: An Extended Framework and Evidence of Nonlinearity by : Mr.Mario Catalan
Download or read book Bank Capital and Lending: An Extended Framework and Evidence of Nonlinearity written by Mr.Mario Catalan and published by International Monetary Fund. This book was released on 2017-11-16 with total page 42 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper studies the transmission of bank capital shocks to loan supply in Indonesia. A series of theoretically founded dynamic panel data models are estimated and find nonlinear effects of capital on loan growth: the response of weaker banks to changes in their capital positions is larger than that of stronger banks. This non-linearity implies that not only the level of capital but also its distribution across banks in the financial system affects the transmission of shocks to aggregate lending. Likewise, the effects of bank recapitalization on loan growth depend on banks’ starting capital positions and the size of capital injections.
Book Synopsis The Role of Bank Capital in Bank Holding Companies’ Decisions by : Mr.Adolfo Barajas
Download or read book The Role of Bank Capital in Bank Holding Companies’ Decisions written by Mr.Adolfo Barajas and published by International Monetary Fund. This book was released on 2015-03-16 with total page 37 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper examines the role of bank capital in decision-making by bank holding companies (BHCs) in the United States. Following Chami and Cosimano’s (2001) call option approach to bank capital, BHCs optimally choose the amount of capital to insure the bank against becoming capital constrained in the future. We provide empirical support for this model, and find that a higher optimal level of capital leads to higher loan rates. Furthermore, higher loan rates result in lower amounts of lending. Thus, an increase in capital requirements is likely to lead to higher loan rates and a significant reduction in lending.
Book Synopsis Credit, Intermediation, and the Macroeconomy by : Sudipto Bhattacharya
Download or read book Credit, Intermediation, and the Macroeconomy written by Sudipto Bhattacharya and published by . This book was released on 2004 with total page 934 pages. Available in PDF, EPUB and Kindle. Book excerpt: Developments in theories of financial markets and institutions, using the tools of the economics of uncertainty and of contracts, as well as results in game theory, have, over the last two decades, constituted an exciting and burgeoning field of research. This collection of readings drawstogether highlights of the 'second generation' literature in this area, emphasizing the theoretical, institutional, and policy-oriented regulatory implications of some of the key modelling techniques in the field.The collection divides into seven sections covering the monitoring role of banks and other intermediaries; liquidity demand and the role of banks and the government; bank runs and financial crises; bank regulation; inter-bank competition and bank--firm relationships; comparative financial systems;and imperfect credit markets and the macroeconomy. Each section comprises four articles previously published in top-ranking economics and finance journals, plus a discussion by a prominent scholar, who provides a synthesis and critique of the literature, and suggests promising directions for futureresearch and application of results.
Book Synopsis Bank Capital and Uncertainty by : Mr.Fabian Valencia
Download or read book Bank Capital and Uncertainty written by Mr.Fabian Valencia and published by International Monetary Fund. This book was released on 2010-09-01 with total page 24 pages. Available in PDF, EPUB and Kindle. Book excerpt: An important role for bank capital is that of a buffer against unexpected losses. As uncertainty about these losses increases, the theory predicts an increase in the optimal level of bank capital. This paper investigates this implication empirically with U.S. Commercial Banks data and finds statistically significant and robust evidence supporting it. A counterfactual experiment suggests that a decline in uncertainty to the lowest level measured in the sample generates an average reduction in bank capital ratios of slightly over 1 percentage point. However, I also find suggestive evidence that the intensity of this precautionary motive is stronger during recessions. From a policy perspective, these results suggest that the effectiveness of countercyclical capital requirements during bad times will be undermined by banks desire to hold more capital in response to increased uncertainty.
Book Synopsis Monetary Policy, Bank Leverage, and Financial Stability by : Mr.Fabian Valencia
Download or read book Monetary Policy, Bank Leverage, and Financial Stability written by Mr.Fabian Valencia and published by International Monetary Fund. This book was released on 2011-10-01 with total page 39 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper develops a model to assess how monetary policy rates affect bank risk-taking. In the model, a reduction in the risk-free rate increases lending profitability by reducing funding costs and increasing the surplus the monopolistic bank extracts from borrowers. Under limited liability, this increased profitability affects only upside returns, inducing the bank to take excessive leverage and hence risk. Excessive risk-taking increases as the interest rate decreases. At a broader level, the model illustrates how a benign macroeconomic environment can lead to excessive risk-taking, and thus it highlights a role for macroprudential regulation.
Book Synopsis The Changing Fortunes of Central Banking by : Philipp Hartmann
Download or read book The Changing Fortunes of Central Banking written by Philipp Hartmann and published by Cambridge University Press. This book was released on 2018-03-29 with total page 423 pages. Available in PDF, EPUB and Kindle. Book excerpt: 22.3.1 Basic Characteristics
Book Synopsis Macrofinancial Modeling At Central Banks by : Mr.Scott Roger
Download or read book Macrofinancial Modeling At Central Banks written by Mr.Scott Roger and published by International Monetary Fund. This book was released on 2012-01-01 with total page 39 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper surveys dynamic stochastic general equilibrium models with financial frictions in use by central banks and discusses priorities for future development of such models for the purpose of monetary and financial stability analysis. It highlights the need to develop macrofinancial models which allow analysis of the macroeconomic effects of macroprudential policy tools and to evaluate elements of the Basel III reforms as a priority. The paper also reviews the main approaches to introducing financial frictions into general equilibrium models.
Book Synopsis Bank Leverage and Monetary Policy's Risk-Taking Channel by : Mr.Giovanni Dell'Ariccia
Download or read book Bank Leverage and Monetary Policy's Risk-Taking Channel written by Mr.Giovanni Dell'Ariccia and published by International Monetary Fund. This book was released on 2013-06-06 with total page 41 pages. Available in PDF, EPUB and Kindle. Book excerpt: We present evidence of a risk-taking channel of monetary policy for the U.S. banking system. We use confidential data on the internal ratings of U.S. banks on loans to businesses over the period 1997 to 2011 from the Federal Reserve’s survey of terms of business lending. We find that ex-ante risk taking by banks (as measured by the risk rating of the bank’s loan portfolio) is negatively associated with increases in short-term policy interest rates. This relationship is less pronounced for banks with relatively low capital or during periods when banks’ capital erodes, such as episodes of financial and economic distress. These results contribute to the ongoing debate on the role of monetary policy in financial stability and suggest that monetary policy has a bearing on the riskiness of banks and financial stability more generally.
Book Synopsis Loan Supply and Bank Capital by : Thomas Kick
Download or read book Loan Supply and Bank Capital written by Thomas Kick and published by . This book was released on 2018 with total page 38 pages. Available in PDF, EPUB and Kindle. Book excerpt: In the presence of financial frictions, banks' capital position may constrain their ability to provide loans. The banking sector may thus have important feedback effects on the macroeconomy. To shed new light on this issue, we combine two approaches. First, we use microeconomic balance sheet data from Germany and estimate banks' loan supply response to capital changes. Second, we modify the model of Gertler and Karadi (2011) such that it can be calibrated to the estimated partial equilibrium elasticity of bank loan supply with respect to bank capital. Although the targeted elasticity is remarkably different from the one in the baseline model, banks continue to be an important originator and amplifier of macroeconomic shocks.Thus, combining microeconometric results with macroeconomic modeling provides evidence on the effects of the banking sector on the macroeconomy.
Book Synopsis Basel III and Bank-Lending: Evidence from the United States and Europe by : Mr.Sami Ben Naceur
Download or read book Basel III and Bank-Lending: Evidence from the United States and Europe written by Mr.Sami Ben Naceur and published by International Monetary Fund. This book was released on 2017-11-15 with total page 54 pages. Available in PDF, EPUB and Kindle. Book excerpt: Using data on commercial banks in the United States and Europe, this paper analyses the impact of the new Basel III capital and liquidity regulation on bank-lending following the 2008 financial crisis. We find that U.S. banks reinforce their risk absorption capacities when expanding their credit activities. Capital ratios have significant, negative impacts on bank-retail-and-other-lending-growth for large European banks in the context of deleveraging and the “credit crunch” in Europe over the post-2008 financial crisis period. Additionally, liquidity indicators have positive but perverse effects on bank-lending-growth, which supports the need to consider heterogeneous banks’ characteristics and behaviors when implementing new regulatory policies.
Book Synopsis Capital Flows, Financial Intermediation and Macroprudential Policies by : Matteo Ghilardi
Download or read book Capital Flows, Financial Intermediation and Macroprudential Policies written by Matteo Ghilardi and published by International Monetary Fund. This book was released on 2014-08-21 with total page 31 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper develops an open-economy DSGE model with an optimizing banking sector to assess the role of capital flows, macro-financial linkages, and macroprudential policies in emerging Asia. The key result is that macro-prudential measures can usefully complement monetary policy. Countercyclical macroprudential polices can help reduce macroeconomic volatility and enhance welfare. The results also demonstrate the importance of capital flows and financial stability for business cycle fluctuations as well as the role of supply side financial accelerator effects in the amplification and propagation of shocks.
Book Synopsis Benefits and Costs of Bank Capital by : Jihad Dagher
Download or read book Benefits and Costs of Bank Capital written by Jihad Dagher and published by International Monetary Fund. This book was released on 2016-03-03 with total page 38 pages. Available in PDF, EPUB and Kindle. Book excerpt: The appropriate level of bank capital and, more generally, a bank’s capacity to absorb losses, has been at the core of the post-crisis policy debate. This paper contributes to the debate by focusing on how much capital would have been needed to avoid imposing losses on bank creditors or resorting to public recapitalizations of banks in past banking crises. The paper also looks at the welfare costs of tighter capital regulation by reviewing the evidence on its potential impact on bank credit and lending rates. Its findings broadly support the range of loss absorbency suggested by the Financial Stability Board (FSB) and the Basel Committee for systemically important banks.
Book Synopsis The Global Macroeconomic Costs of Raising Bank Capital Adequacy Requirements by : Mr.Scott Roger
Download or read book The Global Macroeconomic Costs of Raising Bank Capital Adequacy Requirements written by Mr.Scott Roger and published by International Monetary Fund. This book was released on 2012-02-01 with total page 36 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper examines the transitional macroeconomic costs of a synchronized global increase in bank capital adequacy requirements under Basel III, as well as a capital increase covering globally systemically important banks. The analysis, using an estimated multi-country model, contributed to the work of the Macroeconomic Assessment Group analysis, especially in estimating the potential international spillovers associated with a global increase in capital requirements. The magnitude of the effects found in this analysis is relatively modest, especially if monetary policies have scope to ease in response to a widening of interest rate spreads by banks.
Book Synopsis Aggregate Uncertainty and the Supply of Credit by : Mr.Fabian Valencia
Download or read book Aggregate Uncertainty and the Supply of Credit written by Mr.Fabian Valencia and published by International Monetary Fund. This book was released on 2013-12-02 with total page 26 pages. Available in PDF, EPUB and Kindle. Book excerpt: Recent studies show that uncertainty shocks have quantitatively important effects on the real economy. This paper examines one particular channel at work: the supply of credit. It presents a model in which a bank, even if managed by risk-neutral shareholders and subject to limited liability, can exhibit self-insurance, and thus loan supply contracts when uncertainty increases. This prediction is tested with the universe of U.S. commercial banks over the period 1984-2010. Identification of credit supply is achieved by looking at the differential response of banks according to their level of capitalization. Consistent with the theoretical predictions, increases in uncertainty reduce the supply of credit, more so for banks with lower levels of capitalization. These results are weaker for large banks, and are robust to controlling for the lending and capital channels of monetary policy, to different measures of uncertainty, and to breaking the dataset in subsamples. Quantitatively, uncertainty shocks are almost as important as monetary policy ones with regards to the effects on the supply of credit.
