The effect of capital requirement regulation on the transmission of monetary policy: evidence from Austria

This paper analyzes the role of banks' regulatory capitalization in the transmission of monetary policy. We use a confidential dataset for Austrian banks spanning from the first quarter of 1997 to the fourth quarter of 2003. We find evidence that Austrian banks react in an asymmetric way to mon...

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Bibliographic Details
Published in:Empirica 2007-01, Vol.34 (5), p.411-425
Main Authors: Jokipii, Terhi, Rovira Kaltwasser, Pablo, Engler, Philipp, Merkl, Christian, Vinhas de Souza, Lucio
Format: Article
Language:English
Subjects:
Austria
Bank Capital Channel
Bank Lending Channel
Banking industry
Capital
Capital markets
Capital requirements
Central banks
Effects
Eurozone
Evidence
Impact analysis
Interest rates
Liquidity
Monetary policy
Monetary Policy Transmission
Regulation
Regulation of financial institutions
Studies
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Summary:This paper analyzes the role of banks' regulatory capitalization in the transmission of monetary policy. We use a confidential dataset for Austrian banks spanning from the first quarter of 1997 to the fourth quarter of 2003. We find evidence that Austrian banks react in an asymmetric way to monetary policy depending on their regulatory excess capitalization, i.e. low capitalized banks react more restrictively to a monetary tightening than their highly capitalized peers. [PUBLICATION ABSTRACT]
ISSN:0340-8744
1573-6911
DOI:10.1007/s10663-007-9041-4