Raising CCyBs could have ‘greatly mitigated’ 2008 crisis – St Louis Fed paper

Policy-makers could have avoided a fall in aggregate consumption of 21%, researcher finds

The St Louis Fed
Matthew Black/Flickr (https://bit.ly/3IYY8Dm)

Raising countercyclical capital buffers (CCyB) could have largely prevented the 2008 financial crisis, but not the subsequent recession, a paper published by the Federal Reserve Bank of St Louis finds.

In the paper, Miguel Faria e Castro models the behaviour of the US economy before, during and after the 2008 financial crisis. He then examines whether raising a CCyB would have mitigated some effects of the crisis.

A CCyB is an additional capital buffer that central banks can add to the

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