Monetary Policy with a Touch of Basel

Monetary Policy with a Touch of Basel The typical portrait of monetary policy has the banks and the money supply being manipulated through changes in bank reserves However with only a small portion of bank deposits now subject to reserve

  • Title: Monetary Policy with a Touch of Basel
  • Author: Ralph Chami
  • ISBN: 9786613803054
  • Page: 467
  • Format: ebook
  • The typical portrait of monetary policy has the banks and the money supply being manipulated through changes in bank reserves However, with only a small portion of bank deposits now subject to reserve requirements, an alternative explanation of how monetary policy influences banks is needed Over the last decade, capital requirements have effectively replaced reserve requThe typical portrait of monetary policy has the banks and the money supply being manipulated through changes in bank reserves However, with only a small portion of bank deposits now subject to reserve requirements, an alternative explanation of how monetary policy influences banks is needed Over the last decade, capital requirements have effectively replaced reserve requirements as the main constraint on the behavior of banks This paper explores the implications of Basel capital requirements for monetary policy In particular, we identify a bank balance sheet channel of monetary policy, which operates through the impact on the money stock and the economy.

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