Cyclical Effects of Bank Capital Requirements with Imperfect Credit Markets
This paper analyzes the cyclical effects of bank capital requirements in a simple model with credit market imperfections. Lending rates are set as a premium over the cost of borrowing from the central bank, with the premium itself depending on firm...
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| Format: | Policy Research Working Paper |
| Language: | English |
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2012
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| Online Access: | http://www-wds.worldbank.org/external/default/main?menuPK=64187510&pagePK=64193027&piPK=64187937&theSitePK=523679&menuPK=64187510&searchMenuPK=64187283&siteName=WDS&entityID=000158349_20091007120449 http://hdl.handle.net/10986/4262 |
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okr-10986-4262 |
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oai_dc |
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Digital Repository |
| institution_category |
Foreign Institution |
| institution |
Digital Repositories |
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World Bank Open Knowledge Repository |
| collection |
World Bank |
| language |
English |
| topic |
ACCELERATOR ACCELERATOR EFFECT ACCOUNTING ADVERSE CONSEQUENCES ADVERSE EFFECT ADVERSE SHOCKS AGGREGATE DEMAND AGGREGATE SUPPLY ALTERNATIVE FUNDING ALTERNATIVE REGIMES AMOUNT OF LOANS ARBITRAGE ASSET PRICES ASSET QUALITY ASYMMETRIC INFORMATION BACKED SECURITIES BAD CREDIT BALANCE SHEET BALANCE SHEETS BALANCE-SHEET BANK ASSET BANK ASSETS BANK BEHAVIOR BANK CAPITAL BANK CREDIT BANK DEBT BANK DEPOSIT BANK DEPOSITS BANK FOR INTERNATIONAL SETTLEMENTS BANK LENDING BANK LIQUIDITY BANK LOANS BANK OF CANADA BANK OF ENGLAND BANK REGULATION BANK REGULATIONS BANKRUPTCY BANKS BILL BILLS BONDS BOOK VALUE BORROWER BORROWING BORROWING COSTS BUFFER BUFFERS BUSINESS CYCLE CAPITAL ACCUMULATION CAPITAL ADEQUACY CAPITAL BASE CAPITAL LOANS CAPITAL MARKETS CAPITAL REGULATION CAPITAL REQUIREMENT CAPITAL REQUIREMENTS CAPITAL STANDARDS CAPITAL STOCK CENTRAL BANK CENTRAL BANKING CLARITY COLLATERAL COMMERCIAL BANK COMMERCIAL BANK ASSETS COMMERCIAL BANKS COMMERCIAL PAPER CONSUMPTION EXPENDITURE CONTRACT ENFORCEMENT CORPORATE BONDS CREDIT CRUNCH CREDIT MARKET CREDIT MARKETS CREDIT RATIONING CREDIT RISKS CREDITS CURRENCY DEBT DEBT CONTRACTS DEBT INSTRUMENTS DEBTS DEFAULT RISK DEMAND FOR CREDIT DEPOSIT GUARANTEES DEPOSIT INSURANCE DEPOSITORS DEPOSITS DERIVATIVE DERIVATIVES DEVELOPING COUNTRIES DEVELOPMENT ECONOMICS DEVELOPMENT MACROECONOMICS DISPOSABLE INCOME DISTORTIONS DOMESTIC GOOD DOWNWARD PRESSURE ECONOMIC ACTIVITY ECONOMIC ENVIRONMENT ECONOMIC POLICY ELASTICITY ELASTICITY OF OUTPUT EMPLOYMENT EQUILIBRIUM EQUILIBRIUM CONDITION EQUILIBRIUM CONDITIONS EQUITY CAPITAL EXCESS DEMAND EXCESS SUPPLY EXOGENOUS SHOCK EXOGENOUS SHOCKS EXPENDITURE EXTERNAL FINANCE FINANCIAL CRISIS FINANCIAL FRAGILITIES FINANCIAL INSTITUTIONS FINANCIAL INTERMEDIATION FINANCIAL MARKET FINANCIAL MARKETS FINANCIAL SECTOR FINANCIAL STABILITY FINANCIAL SYSTEM FINANCIAL SYSTEMS FUNDING SOURCES GENERAL EQUILIBRIUM GENERAL EQUILIBRIUM ANALYSIS GROWTH RATE HOLDING HOMOGENEOUS GOOD HOUSEHOLD DEPOSITS HOUSEHOLD WEALTH HOUSEHOLDS HOUSING ID IMPACT ON PRICES INADEQUATE DISCLOSURE INCOME EFFECT INDEXATION INFLATION INFLATION RATE INTEREST PAYMENTS INTEREST RATE INTEREST RATES INTERNATIONAL BANK INVESTMENT PURPOSES LABOR COSTS LEGAL SYSTEM LEVEL OF INVESTMENT LEVERAGE LIABILITY LIABILITY MANAGEMENT LIQUIDITY CONSTRAINTS LOAN LOAN DEFAULT LOAN DEMAND MACROECONOMIC EFFECTS MACROECONOMIC MODEL MACROECONOMICS MARGINAL COST MARKET DISCIPLINE MARKET EQUILIBRIUM MARKET RATES MONETARY AUTHORITY MONETARY ECONOMICS MONETARY SHOCKS MONETARY TRANSMISSION MORAL HAZARD MORTGAGE MORTGAGE MARKET MORTGAGE-BACKED SECURITIES MORTGAGES NEGATIVE SUPPLY SHOCK NET WORTH NOMINAL WAGE OPEN ECONOMIES OPPORTUNITY COST PENALTIES PHYSICAL CAPITAL PLEDGE COLLATERAL PORTFOLIOS POSSIBILITY OF DEFAULT PRICE HIKE PRICE INCREASE PRIVATE CONSUMPTION PROBABILITY OF DEFAULT PRODUCTION COSTS PRODUCTION FUNCTION PROFIT MARGIN PROPERTY RIGHTS PRUDENTIAL REGULATIONS RATE OF INFLATION REAL CONSUMPTION REAL INVESTMENT RECESSION REGULATORY AUTHORITY REGULATORY FRAMEWORK REGULATORY REFORMS REGULATORY REGIMES REPAYMENT RESERVE RESERVE ADEQUACY RESERVE REQUIREMENTS RESERVES RETAINED EARNINGS RETURN RETURN ON EQUITY RISK AVERSE RISK EXPOSURE RISK MANAGEMENT RISK PREMIUM RISK TAKING SECURITIES SIGNALING SOLVENCY SUBSTITUTION EFFECT SUPPLY CURVE TERMS OF CREDIT TOTAL CREDIT TOTAL CURRENCY TRANSMISSION MECHANISM TRANSMISSION OF MONETARY POLICY TRANSPARENCY UNCERTAINTY UNDERDEVELOPED CAPITAL MARKETS UPWARD JUMP UPWARD PRESSURE VALUE OF COLLATERAL VULNERABILITY TO SHOCKS WAGES WEALTH WEIGHTS WORKING CAPITAL WRITEDOWNS |
| spellingShingle |
ACCELERATOR ACCELERATOR EFFECT ACCOUNTING ADVERSE CONSEQUENCES ADVERSE EFFECT ADVERSE SHOCKS AGGREGATE DEMAND AGGREGATE SUPPLY ALTERNATIVE FUNDING ALTERNATIVE REGIMES AMOUNT OF LOANS ARBITRAGE ASSET PRICES ASSET QUALITY ASYMMETRIC INFORMATION BACKED SECURITIES BAD CREDIT BALANCE SHEET BALANCE SHEETS BALANCE-SHEET BANK ASSET BANK ASSETS BANK BEHAVIOR BANK CAPITAL BANK CREDIT BANK DEBT BANK DEPOSIT BANK DEPOSITS BANK FOR INTERNATIONAL SETTLEMENTS BANK LENDING BANK LIQUIDITY BANK LOANS BANK OF CANADA BANK OF ENGLAND BANK REGULATION BANK REGULATIONS BANKRUPTCY BANKS BILL BILLS BONDS BOOK VALUE BORROWER BORROWING BORROWING COSTS BUFFER BUFFERS BUSINESS CYCLE CAPITAL ACCUMULATION CAPITAL ADEQUACY CAPITAL BASE CAPITAL LOANS CAPITAL MARKETS CAPITAL REGULATION CAPITAL REQUIREMENT CAPITAL REQUIREMENTS CAPITAL STANDARDS CAPITAL STOCK CENTRAL BANK CENTRAL BANKING CLARITY COLLATERAL COMMERCIAL BANK COMMERCIAL BANK ASSETS COMMERCIAL BANKS COMMERCIAL PAPER CONSUMPTION EXPENDITURE CONTRACT ENFORCEMENT CORPORATE BONDS CREDIT CRUNCH CREDIT MARKET CREDIT MARKETS CREDIT RATIONING CREDIT RISKS CREDITS CURRENCY DEBT DEBT CONTRACTS DEBT INSTRUMENTS DEBTS DEFAULT RISK DEMAND FOR CREDIT DEPOSIT GUARANTEES DEPOSIT INSURANCE DEPOSITORS DEPOSITS DERIVATIVE DERIVATIVES DEVELOPING COUNTRIES DEVELOPMENT ECONOMICS DEVELOPMENT MACROECONOMICS DISPOSABLE INCOME DISTORTIONS DOMESTIC GOOD DOWNWARD PRESSURE ECONOMIC ACTIVITY ECONOMIC ENVIRONMENT ECONOMIC POLICY ELASTICITY ELASTICITY OF OUTPUT EMPLOYMENT EQUILIBRIUM EQUILIBRIUM CONDITION EQUILIBRIUM CONDITIONS EQUITY CAPITAL EXCESS DEMAND EXCESS SUPPLY EXOGENOUS SHOCK EXOGENOUS SHOCKS EXPENDITURE EXTERNAL FINANCE FINANCIAL CRISIS FINANCIAL FRAGILITIES FINANCIAL INSTITUTIONS FINANCIAL INTERMEDIATION FINANCIAL MARKET FINANCIAL MARKETS FINANCIAL SECTOR FINANCIAL STABILITY FINANCIAL SYSTEM FINANCIAL SYSTEMS FUNDING SOURCES GENERAL EQUILIBRIUM GENERAL EQUILIBRIUM ANALYSIS GROWTH RATE HOLDING HOMOGENEOUS GOOD HOUSEHOLD DEPOSITS HOUSEHOLD WEALTH HOUSEHOLDS HOUSING ID IMPACT ON PRICES INADEQUATE DISCLOSURE INCOME EFFECT INDEXATION INFLATION INFLATION RATE INTEREST PAYMENTS INTEREST RATE INTEREST RATES INTERNATIONAL BANK INVESTMENT PURPOSES LABOR COSTS LEGAL SYSTEM LEVEL OF INVESTMENT LEVERAGE LIABILITY LIABILITY MANAGEMENT LIQUIDITY CONSTRAINTS LOAN LOAN DEFAULT LOAN DEMAND MACROECONOMIC EFFECTS MACROECONOMIC MODEL MACROECONOMICS MARGINAL COST MARKET DISCIPLINE MARKET EQUILIBRIUM MARKET RATES MONETARY AUTHORITY MONETARY ECONOMICS MONETARY SHOCKS MONETARY TRANSMISSION MORAL HAZARD MORTGAGE MORTGAGE MARKET MORTGAGE-BACKED SECURITIES MORTGAGES NEGATIVE SUPPLY SHOCK NET WORTH NOMINAL WAGE OPEN ECONOMIES OPPORTUNITY COST PENALTIES PHYSICAL CAPITAL PLEDGE COLLATERAL PORTFOLIOS POSSIBILITY OF DEFAULT PRICE HIKE PRICE INCREASE PRIVATE CONSUMPTION PROBABILITY OF DEFAULT PRODUCTION COSTS PRODUCTION FUNCTION PROFIT MARGIN PROPERTY RIGHTS PRUDENTIAL REGULATIONS RATE OF INFLATION REAL CONSUMPTION REAL INVESTMENT RECESSION REGULATORY AUTHORITY REGULATORY FRAMEWORK REGULATORY REFORMS REGULATORY REGIMES REPAYMENT RESERVE RESERVE ADEQUACY RESERVE REQUIREMENTS RESERVES RETAINED EARNINGS RETURN RETURN ON EQUITY RISK AVERSE RISK EXPOSURE RISK MANAGEMENT RISK PREMIUM RISK TAKING SECURITIES SIGNALING SOLVENCY SUBSTITUTION EFFECT SUPPLY CURVE TERMS OF CREDIT TOTAL CREDIT TOTAL CURRENCY TRANSMISSION MECHANISM TRANSMISSION OF MONETARY POLICY TRANSPARENCY UNCERTAINTY UNDERDEVELOPED CAPITAL MARKETS UPWARD JUMP UPWARD PRESSURE VALUE OF COLLATERAL VULNERABILITY TO SHOCKS WAGES WEALTH WEIGHTS WORKING CAPITAL WRITEDOWNS Agénor, Pierre-Richard Pereira da Silva, Luiz A. Cyclical Effects of Bank Capital Requirements with Imperfect Credit Markets |
| relation |
Policy Research Working Paper ; No. 5067 |
| description |
This paper analyzes the cyclical effects
of bank capital requirements in a simple model with credit
market imperfections. Lending rates are set as a premium
over the cost of borrowing from the central bank, with the
premium itself depending on firms effective collateral.
Basel I- and Basel II-type regulatory regimes are defined
and a capital channel is introduced through a signaling
effect of capital buffers on the cost of bank deposits. The
macroeconomic effects of various shocks (a drop in output,
an increase in the refinance rate, and a rise in the capital
adequacy ratio) are analyzed, under both binding and
nonbinding capital requirements. Factors affecting the
procyclicality of each regime (defined in terms of the
behavior of the risk premium) are also identified and policy
implications are discussed. |
| format |
Publications & Research :: Policy Research Working Paper |
| author |
Agénor, Pierre-Richard Pereira da Silva, Luiz A. |
| author_facet |
Agénor, Pierre-Richard Pereira da Silva, Luiz A. |
| author_sort |
Agénor, Pierre-Richard |
| title |
Cyclical Effects of Bank Capital Requirements with Imperfect Credit Markets |
| title_short |
Cyclical Effects of Bank Capital Requirements with Imperfect Credit Markets |
| title_full |
Cyclical Effects of Bank Capital Requirements with Imperfect Credit Markets |
| title_fullStr |
Cyclical Effects of Bank Capital Requirements with Imperfect Credit Markets |
| title_full_unstemmed |
Cyclical Effects of Bank Capital Requirements with Imperfect Credit Markets |
| title_sort |
cyclical effects of bank capital requirements with imperfect credit markets |
| publishDate |
2012 |
| url |
http://www-wds.worldbank.org/external/default/main?menuPK=64187510&pagePK=64193027&piPK=64187937&theSitePK=523679&menuPK=64187510&searchMenuPK=64187283&siteName=WDS&entityID=000158349_20091007120449 http://hdl.handle.net/10986/4262 |
| _version_ |
1764390647231414272 |
| spelling |
okr-10986-42622021-04-23T14:02:16Z Cyclical Effects of Bank Capital Requirements with Imperfect Credit Markets Agénor, Pierre-Richard Pereira da Silva, Luiz A. ACCELERATOR ACCELERATOR EFFECT ACCOUNTING ADVERSE CONSEQUENCES ADVERSE EFFECT ADVERSE SHOCKS AGGREGATE DEMAND AGGREGATE SUPPLY ALTERNATIVE FUNDING ALTERNATIVE REGIMES AMOUNT OF LOANS ARBITRAGE ASSET PRICES ASSET QUALITY ASYMMETRIC INFORMATION BACKED SECURITIES BAD CREDIT BALANCE SHEET BALANCE SHEETS BALANCE-SHEET BANK ASSET BANK ASSETS BANK BEHAVIOR BANK CAPITAL BANK CREDIT BANK DEBT BANK DEPOSIT BANK DEPOSITS BANK FOR INTERNATIONAL SETTLEMENTS BANK LENDING BANK LIQUIDITY BANK LOANS BANK OF CANADA BANK OF ENGLAND BANK REGULATION BANK REGULATIONS BANKRUPTCY BANKS BILL BILLS BONDS BOOK VALUE BORROWER BORROWING BORROWING COSTS BUFFER BUFFERS BUSINESS CYCLE CAPITAL ACCUMULATION CAPITAL ADEQUACY CAPITAL BASE CAPITAL LOANS CAPITAL MARKETS CAPITAL REGULATION CAPITAL REQUIREMENT CAPITAL REQUIREMENTS CAPITAL STANDARDS CAPITAL STOCK CENTRAL BANK CENTRAL BANKING CLARITY COLLATERAL COMMERCIAL BANK COMMERCIAL BANK ASSETS COMMERCIAL BANKS COMMERCIAL PAPER CONSUMPTION EXPENDITURE CONTRACT ENFORCEMENT CORPORATE BONDS CREDIT CRUNCH CREDIT MARKET CREDIT MARKETS CREDIT RATIONING CREDIT RISKS CREDITS CURRENCY DEBT DEBT CONTRACTS DEBT INSTRUMENTS DEBTS DEFAULT RISK DEMAND FOR CREDIT DEPOSIT GUARANTEES DEPOSIT INSURANCE DEPOSITORS DEPOSITS DERIVATIVE DERIVATIVES DEVELOPING COUNTRIES DEVELOPMENT ECONOMICS DEVELOPMENT MACROECONOMICS DISPOSABLE INCOME DISTORTIONS DOMESTIC GOOD DOWNWARD PRESSURE ECONOMIC ACTIVITY ECONOMIC ENVIRONMENT ECONOMIC POLICY ELASTICITY ELASTICITY OF OUTPUT EMPLOYMENT EQUILIBRIUM EQUILIBRIUM CONDITION EQUILIBRIUM CONDITIONS EQUITY CAPITAL EXCESS DEMAND EXCESS SUPPLY EXOGENOUS SHOCK EXOGENOUS SHOCKS EXPENDITURE EXTERNAL FINANCE FINANCIAL CRISIS FINANCIAL FRAGILITIES FINANCIAL INSTITUTIONS FINANCIAL INTERMEDIATION FINANCIAL MARKET FINANCIAL MARKETS FINANCIAL SECTOR FINANCIAL STABILITY FINANCIAL SYSTEM FINANCIAL SYSTEMS FUNDING SOURCES GENERAL EQUILIBRIUM GENERAL EQUILIBRIUM ANALYSIS GROWTH RATE HOLDING HOMOGENEOUS GOOD HOUSEHOLD DEPOSITS HOUSEHOLD WEALTH HOUSEHOLDS HOUSING ID IMPACT ON PRICES INADEQUATE DISCLOSURE INCOME EFFECT INDEXATION INFLATION INFLATION RATE INTEREST PAYMENTS INTEREST RATE INTEREST RATES INTERNATIONAL BANK INVESTMENT PURPOSES LABOR COSTS LEGAL SYSTEM LEVEL OF INVESTMENT LEVERAGE LIABILITY LIABILITY MANAGEMENT LIQUIDITY CONSTRAINTS LOAN LOAN DEFAULT LOAN DEMAND MACROECONOMIC EFFECTS MACROECONOMIC MODEL MACROECONOMICS MARGINAL COST MARKET DISCIPLINE MARKET EQUILIBRIUM MARKET RATES MONETARY AUTHORITY MONETARY ECONOMICS MONETARY SHOCKS MONETARY TRANSMISSION MORAL HAZARD MORTGAGE MORTGAGE MARKET MORTGAGE-BACKED SECURITIES MORTGAGES NEGATIVE SUPPLY SHOCK NET WORTH NOMINAL WAGE OPEN ECONOMIES OPPORTUNITY COST PENALTIES PHYSICAL CAPITAL PLEDGE COLLATERAL PORTFOLIOS POSSIBILITY OF DEFAULT PRICE HIKE PRICE INCREASE PRIVATE CONSUMPTION PROBABILITY OF DEFAULT PRODUCTION COSTS PRODUCTION FUNCTION PROFIT MARGIN PROPERTY RIGHTS PRUDENTIAL REGULATIONS RATE OF INFLATION REAL CONSUMPTION REAL INVESTMENT RECESSION REGULATORY AUTHORITY REGULATORY FRAMEWORK REGULATORY REFORMS REGULATORY REGIMES REPAYMENT RESERVE RESERVE ADEQUACY RESERVE REQUIREMENTS RESERVES RETAINED EARNINGS RETURN RETURN ON EQUITY RISK AVERSE RISK EXPOSURE RISK MANAGEMENT RISK PREMIUM RISK TAKING SECURITIES SIGNALING SOLVENCY SUBSTITUTION EFFECT SUPPLY CURVE TERMS OF CREDIT TOTAL CREDIT TOTAL CURRENCY TRANSMISSION MECHANISM TRANSMISSION OF MONETARY POLICY TRANSPARENCY UNCERTAINTY UNDERDEVELOPED CAPITAL MARKETS UPWARD JUMP UPWARD PRESSURE VALUE OF COLLATERAL VULNERABILITY TO SHOCKS WAGES WEALTH WEIGHTS WORKING CAPITAL WRITEDOWNS This paper analyzes the cyclical effects of bank capital requirements in a simple model with credit market imperfections. Lending rates are set as a premium over the cost of borrowing from the central bank, with the premium itself depending on firms effective collateral. Basel I- and Basel II-type regulatory regimes are defined and a capital channel is introduced through a signaling effect of capital buffers on the cost of bank deposits. The macroeconomic effects of various shocks (a drop in output, an increase in the refinance rate, and a rise in the capital adequacy ratio) are analyzed, under both binding and nonbinding capital requirements. Factors affecting the procyclicality of each regime (defined in terms of the behavior of the risk premium) are also identified and policy implications are discussed. 2012-03-19T19:12:49Z 2012-03-19T19:12:49Z 2009-09-01 http://www-wds.worldbank.org/external/default/main?menuPK=64187510&pagePK=64193027&piPK=64187937&theSitePK=523679&menuPK=64187510&searchMenuPK=64187283&siteName=WDS&entityID=000158349_20091007120449 http://hdl.handle.net/10986/4262 English Policy Research Working Paper ; No. 5067 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo/ World Bank Publications & Research :: Policy Research Working Paper |