Countercyclical Capital and Currency Dependence

20 Pages Posted: 3 Jan 2006

See all articles by Jon Danielsson

Jon Danielsson

London School of Economics - Systemic Risk Centre

Asgeir Jonsson

University of Iceland - Faculty of Economics and Business Administration

Abstract

The introduction of risk sensitive bank capital charges into currency dependent economies exasperates the inherent procyclicality of banking regulations and frustrates the conduct of monetary policy. The authors argue that, by requiring capital charges resulting from foreign currency lending to be denominated in the same foreign currency, the capital charge becomes countercyclical.

Suggested Citation

Danielsson, Jon and Jonsson, Asgeir, Countercyclical Capital and Currency Dependence. Financial Markets, Institutions & Instruments, Vol. 14, No. 5, pp. 329-348, December 2005, Available at SSRN: https://ssrn.com/abstract=869289 or http://dx.doi.org/10.1111/j.0963-8008.2005.00110.x

Jon Danielsson (Contact Author)

London School of Economics - Systemic Risk Centre ( email )

Houghton Street
London WC2A 2AE
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+44.207.955.6056 (Phone)

HOME PAGE: http://www.riskreasearch.org

Asgeir Jonsson

University of Iceland - Faculty of Economics and Business Administration ( email )

IS-101 Reykjavik
Iceland

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