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Bank Regulation and Macroeconomic Fluctuations

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Authors
Goodhart, Charles; Hofmann, Boris; Segoviano, Miguel
Issue Date
2006
Publisher
Seoul Journal of Economics
Citation
Seoul Journal of Economics 19 (No. 1 2006): 3-42
Keywords
Basel II; Asset prices; Bank lending; Procyclicality
Abstract
Over the last two decades, macroeconomic cycles were frequently associated with boom-bust cycles in bank lending and asset prices, often followed by financial instability. In this paper we argue that (i) the new pattern of macroeconomic cycles is partly the result of banking-sector liberalization since the early/mid-1970s, which has increased the procyclicality of the financial system; (ii) the regulation of bank capital in the form of capital adequacy requirements is itself inherently pro cyclical and may therefore amplify business-cycle fluctuations; (iii) the new Basel II Accord may considerably accentuate the procyclicality of the regulatory system.
ISSN
1225-0279
Language
English
URI
http://hdl.handle.net/10371/1345
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College of Social Sciences (사회과학대학)Institute of Economics Research (경제연구소)Seoul Journal of EconomicsSeoul Journal of Economics vol.19(1) (Spring 2006)
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