The Disturbing Interaction Between Countercyclical Capital Requirements and Systemic Risk

Discussion of “Monetary and Macroprudential Policy in an Estimated DSGE Model of the

The recent crisis has highlighted the need for a “macroprudential policy” ensuring financial stability. One of the key aspects of this forthcoming macroprudential policy is the setting of bank capital requirements conditionally on the state of the economy—what the Basel Committee on Banking Supervision (2010) calls the “countercyclical capital buffer.” This raises the issue of the interactions ...

Measure of systemic risk in the interbank market in Iran by buffer capital and hyperlink-induced topic search algorithm

Considering that the interbank market is considered as a night market to provide short-term liquidity to banks, one of the most important risks in this market - due to the short-term nature of transactions in this market - is systemic risk. Exercising this risk cycle will have devastating effects on monetary policymakers, such as the 2007-2009 crisis.  In this study, first, the buffer capital ...

Higher Bank Capital Requirements and mortgage pricing: evidence from the Countercyclical Capital Buffer (CCB)

Estimation of capital requirements in the Iranian banking system To deal with market and credit risks

Each financial institution faces different types of risks, with three of the most important risks in the banking system being credit, market and operational risks. In order to manage risk, sufficient capital must be allocated. One of the common ways to calculate the capital needed to deal with these risks is to calculate the capital proportional to each risk and then the algebraic sum to obtain...

Search Frictions in Physical Capital Markets as a Propagation Mechanism

We build a Dynamic General Equilibrium model with search frictions for the allocation of physical capital and investigate its implications for the business cycle. While the model is in principle capable of generating substantial internal propagation to small exogenous shocks, the quantitative effects are modest once we calibrate the model to fit firm-level capital flows. We then extend the mode...