New model prescribes strongly counter-cyclical medicine for financial shocks


A team of four researchers at the Bank of Canada (BoC) have developed a model to explore the macroeconomic implications of various types of counter-cyclical bank capital regulations, finding that such rules can have a significant stabilising effect in the wake of financial shocks.

The paper – Countercyclical Bank Capital Requirement and Optimized Monetary Policy Rules, by Carlos de Resende, Ali Dib, René Lalonde and Nikita Perevalov – also finds that bank capital regulatory policy and monetary

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