Glad to contribute to an important policy paper on assessing the impact of Basel III capital requirements, which is forthcoming at the International Journal of Central Banking. In the paper, we first review the different channels of transmission of prudential policy highlighted in the literature. We then provide a quantitative assessment of the impact of Basel III reforms using several policy-oriented DSGE models. We show that the long-term effects on GDP of higher capital requirements are positive when the associated benefits are accounted for in addition to their costs. However, the results crucially depend on assumptions about crisis probability and severity. For liquidity regulations, only models capturing benefits of increased liquidity (e.g., preventing bank runs) show a net benefit. You can find more in the paper: https://lnkd.in/ekTVFG5N Many thanks to amazing colleagues who made it possible!
Congrats, Yasin!
Congratulations Yasin! Well done ✅