Basel III: Long‐Term Impact on Economic Performance and Fluctuations

35 Pages Posted: 22 Jan 2015

See all articles by Paolo Angelini

Paolo Angelini

Bank of Italy

Laurent Clerc

Banque de France

Vasco Cúrdia

Federal Reserve Bank of San Francisco

Leonardo Gambacorta

Bank for International Settlements (BIS); Centre for Economic Policy Research (CEPR)

Andrea Gerali

Bank of Italy

Alberto Locarno

Bank of Italy

Roberto Motto

European Central Bank (ECB)

Werner Roeger

European Commission, DGECFIN

Skander Van den Heuvel

Board of Governors of the Federal Reserve System

Jan Vlček

International Monetary Fund (IMF)

Multiple version iconThere are 5 versions of this paper

Date Written: March 2015

Abstract

Using a wide range of macroeconomic and econometric models we assess the long‐term economic impact of the Basel III reform. Our main results are the following. (1) The economic costs of the new regulatory standards for bank capital and liquidity are considerably below existing estimates of the benefits that the reform should have by reducing the probability of banking crises (Basel Committee on Banking Supervision (2010) ‘An Assessment of the Long‐term Impact of Stronger Capital and Liquidity Requirements’, Basel). (2) The reform dampens output volatility modestly, although there is some heterogeneity across models. (3) The adoption of countercyclical capital buffers can substantially amplify the dampening effect on output volatility.

Suggested Citation

Angelini, Paolo and Clerc, Laurent and Cúrdia, Vasco and Gambacorta, Leonardo and Gerali, Andrea and Locarno, Alberto and Motto, Roberto and Roeger, Werner and Van den Heuvel, Skander and Vlcek, Jan, Basel III: Long‐Term Impact on Economic Performance and Fluctuations (March 2015). The Manchester School, Vol. 83, Issue 2, pp. 217-251, 2015, Available at SSRN: https://ssrn.com/abstract=2553574 or http://dx.doi.org/10.1111/manc.12056

Paolo Angelini (Contact Author)

Bank of Italy ( email )

Via Nazionale 91
Rome, 00184
Italy

Laurent Clerc

Banque de France ( email )

Paris
France

Vasco Cúrdia

Federal Reserve Bank of San Francisco ( email )

101 Market Street
MS 1130
San Francisco, CA 94105
United States
(415) 977-3624 (Phone)

HOME PAGE: http://www.frbsf.org/economics/economists/staff.php?vcurdia

Leonardo Gambacorta

Bank for International Settlements (BIS) ( email )

Centralbahnplatz 2
Basel, Basel-Stadt 4002
Switzerland

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Andrea Gerali

Bank of Italy ( email )

Via Nazionale 91
Rome, 00184
Italy

Alberto Locarno

Bank of Italy ( email )

Via Nazionale 91
Rome, 00184
Italy

Roberto Motto

European Central Bank (ECB) ( email )

Kaiserstrasse 29
Postfach 16 03 19
D-60311 Frankfurt am Main
Germany

Werner Roeger

European Commission, DGECFIN ( email )

Economic and Financial Affairs
BU1-3/159, 200 Rue de la Loi
B-1049 Brussels
Belgium

Skander Van den Heuvel

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

Jan Vlcek

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

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