BIS research tests leverage ratio with adjusted DSGE model
Authors find range of benefits to constraining leverage
An updated general equilibrium model implies the Basel III leverage ratio can deliver significant benefits, a working paper published by the Bank for International Settlements finds.
Published today (September 30), the work by Leonardo Gambacorta and Sudipto Karmakar focuses on designing a dynamic stochastic general equilibrium model that reflects both leverage and risk-weighted capital constraints. They allow risk weights to vary on lending to households and non-financial firms to better
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