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

Angelini, Paolo; Clerc, Laurent; Cúrdia, Vasco; Gambacorta, Leonardo; Gerali, Andrea; Locarno, Alberto; Motto, Roberto; Roeger, Werner; Van den Heuvel, Skander; Vlček, Jan

doi:10.1111/manc.12056

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

The Manchester School, Vol. 83, Issue 2, pp. 217-251, 2015

35 Pages Posted: 22 Jan 2015

See all articles by Paolo Angelini

Leonardo Gambacorta

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

Skander Van den Heuvel

Board of Governors of the Federal Reserve System

Jan Vlček

International Monetary Fund (IMF)

There 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: 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