Two-period model of bank lending channel

Basel II regulatory constraints

Research output: Contribution to journalArticle

Abstract

This paper predicts the dynamic model of the bank lending channel under Basel II regulatory constraints with monopolistic competition. The two-period model is chosen in order to demonstrate the effects of new Basel capital constraints on the risks of banks assets during both periods; and the amount of equity in the second period. The prediction of period one and two are shown to have the same effect and the only difference is the constraint. The regulatory constraint in periods one and two are predicted depending on the regulatory parameters and constraints for both periods. Thus, the effect of optimal rates on a policy rate is felt greater or less during the first period than during the second period, which means tightening capital requirements increases or decreases the risks of assets and banks taking higher or lower risks, respectively,during the first period than during the second period.

Original languageEnglish
Pages (from-to)87-97
Number of pages11
JournalJurnal Ekonomi Malaysia
Volume48
Issue number1
Publication statusPublished - 2014

Fingerprint

Basel II
Bank lending channel
Assets
Basel
Capital requirements
Equity
Capital constraints
Monopolistic competition
Prediction

Keywords

  • Bank lending channel
  • Basel II
  • Bellman equation
  • Two period model

ASJC Scopus subject areas

  • Business, Management and Accounting (miscellaneous)

Cite this

Two-period model of bank lending channel : Basel II regulatory constraints. / Said, Fathin Faizah.

In: Jurnal Ekonomi Malaysia, Vol. 48, No. 1, 2014, p. 87-97.

Research output: Contribution to journalArticle

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