BIS research tests leverage ratio with adjusted DSGE model

The Bank for International Settlements

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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