Countercyclical reserve requirements in a heterogeneous-agent and incomplete financial markets economy

Bustamante, Christian; Hamann, Franz

doi:10.1016/j.jmacro.2015.08.002

Cited by 7 publications

(3 citation statements)

References 9 publications

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“…Reserve requirements for liabilities denominated in domestic currency reduce banks' risk (models 1, 2 and 7), while reserve requirements for foreign currency denominated liabilities increase the risk incentives of banks (models 1, 2 and 6), but the associated coefficients are not statistically significant. As an explanation for these findings might be the fact that reserve requirements were mainly used by emerging countries (Bustamante and Hamann, 2015) that have limited observations in our sample. In line with our results, Bruno et al (2016), Kuttner and Shim (2016) and Akinci and Olmstead-Rumsey (2018) found no or only a weakly significant impact of higher reserve requirements on credit growth, and therefore, on the risk assumed.…”

Section: The Impact Of Macroprudential Policies On Individual Riskmentioning

confidence: 85%

Effects of Macroprudential Policy on Systemic Risk and Bank Risk Taking

2017

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Using an international sample of 95 banks from 21 European and North American countries spanning from 2008 to 2014, this paper assesses the effectiveness of a large set of general and housing macro-prudential policies in controlling banks' systemic importance and risk-taking incentives. Empirical findings indicate that tightening the general capital requirements, sector specific capital buffers, along with housing countercyclical capital requirements and Debt-Service-to-Income lending criteria significantly reduce banks' contribution to systemic risk and their individual risk-taking. A similar effect has been obtained for loosening real estate loans loss provisioning. Furthermore, the nexus between macroprudential policies and banks' risk is shaped through several channels like bank size, the share of foreign bank assets, banking sector competition and the independence of supervisory authority.

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Section: The Impact Of Macroprudential Policies On Individual Riskmentioning

confidence: 85%

Effects of Macroprudential Policy on Systemic Risk and Bank Risk Taking

2017

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“…In other studies, Bustamante and Hamann (2015) find that countercyclical reserve requirements help in reducing consumption volatility when banks become more riskaverse. The imperfect substitution between bank deposits and loans from the central bank is attributed to the effectivity of reserve requirements.…”

Section: Related Literaturementioning

confidence: 86%

Monetary and macroprudential policies in the presence of external shocks: evidence from an emerging economy

Lubis

Alexiou

Nellis

2021

JES

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PurposeThis paper examines the impact of using the reserve requirements, combined with foreign exchange (FX) intervention, as key instruments in an inflation-targeting framework.Design/methodology/approachIn the context of a dynamic stochastic general equilibrium (DSGE) framework and using Bayesian techniques, the authors estimate a model for the Indonesian economy using quarterly data spanning the period 2005Q2–2019Q4.FindingsThe reserve requirement is found to assume a complementary role to that of the interest rate policy and FX intervention when used to stabilise the macroeconomy.Originality/valueThis paper provides a benchmark for other emerging countries that consider adopting the inflation targeting framework and impose an FX intervention as part of their monetary policy.

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“…In his study [28] that a crisis like Covid-19 will raise negative expectations of economic conditions. Meanwhile, [29] argues that countercyclical policies are effective in crisis threats because credit risk increases. Monetary policy by increasing the money supply to encourage people to carry out consumption and production activities.…”

Section: Literatur Reviewmentioning

confidence: 99%

Bank Performance Based on Core Capital Amid the COVID-19 Pandemic in Indonesia

Susilowati

Purnama

2022

KSS

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COVID-19 has had an impact on banking, liquidity and credit. The Financial Services Authority (OJK) has tried to mitigate some of these effects with countercyclical policies as stated in OJK regulation number 11/POJK.03/2020. It is however unclear whether the policy can reduce banking risk in the midst of easing or relaxation policies. This research employed secondary data taken from the Indonesian banking statistics published by OJK. Indicators of bank performance used in the study referred to the policies of the OJK and comprised: capital adequacy ratio, core capital ratio to riskweighted asset, return on assets ratio, operational efficiency ratio, net interest margin ratio, loans to deposits ratio, and liquid assets ratio. The performance index analysis was divided into two periods: January 2017- February 2020 and March 2020 - February 2021. The period was divided to determine the quality of bank performance before and after the stipulation of restructuring policy. The index calculation was carried out by determining the weight based on the dimensions (bank performance indicators). The weight given to each of these indicators was conformed to all indicators. The analysis of the bank performance used the composite index of development calculation. Based on the results, the availability of bank capital affected financial performance. The implementation of countercyclical policies had an impact on bank performance in banks that had greater availability of capital. Banks can evaluate and improve strategies in countercyclical implementation to support national economic recovery. Keywords: core capital, CAR, CCR to RWA, ROA, OER, NIMR, LDR

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Countercyclical reserve requirements in a heterogeneous-agent and incomplete financial markets economy

Cited by 7 publications

References 9 publications

Effects of Macroprudential Policy on Systemic Risk and Bank Risk Taking

Effects of Macroprudential Policy on Systemic Risk and Bank Risk Taking

Monetary and macroprudential policies in the presence of external shocks: evidence from an emerging economy

Bank Performance Based on Core Capital Amid the COVID-19 Pandemic in Indonesia

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