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Unpublished Paper
Basel accord and financial intermediation: the impact of policy
(2007)
  • Martin Berka
  • Christian Zimmermann, University of Connecticut
Abstract

This paper studies loan activity in a context where banks have to follow Basel Accord type rules and need to find financing with the households. Loan activity typically decreases when investment returns of entrepreneurs decline, and we study which type of policy could revigorate an economy in a trough. We find that active monetary policy increases loan volume even when the economy is in a good shape, while introducing active capital requirement policy can be effective as well if it implies tightening of regulation in bad times. This is performed with an heterogeneous agent economy with occupational choice, financial intermediation and aggregate shocks to the distribution of entrepreneurial returns.

Keywords
  • Bank Capital Channel,
  • Capital Requirements,
  • Basel Accord,
  • Occupational Choice,
  • Bankruptcy,
  • Credit Crunch
Disciplines
Publication Date
2007
Citation Information
Martin Berka and Christian Zimmermann. "Basel accord and financial intermediation: the impact of policy" (2007)
Available at: http://works.bepress.com/martin_berka/4/