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The Role Of Countercyclical Measures In Controlling The Procyclical Behaviour Of Banks

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  • Irina – Raluca Badea

    (University of Craiova Faculty of Economics and Business Administration)

Abstract

The global financial crisis has triggered both questions and answers to the ‘stakeholders’ of the financial system. On the one hand, the key notions that rule the financial world refer to financial stability, systemic risk and interlinked market participants. Nevertheless, the procyclicality of the monetary policy reveals the weaknesses of the authorities’ policymaking; therefore, countercyclical measures are required to be taken in order to prevent the financial system from collapsing because of the procyclical behaviour of banks.This paper aims at outlining the importance of the countercyclical policies, with regard to the regulatory framework of the monetary policy, the ongoing capital requirements of the Basel III and the incentives that influence the cyclical behavior of banks.

Suggested Citation

  • Irina – Raluca Badea, 2015. "The Role Of Countercyclical Measures In Controlling The Procyclical Behaviour Of Banks," Annals of University of Craiova - Economic Sciences Series, University of Craiova, Faculty of Economics and Business Administration, vol. 1(43), pages 210-218.
    • Handle: RePEc:aio:aucsse:v:1:y:2015:i:43:p:210-218
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    File URL: http://feaa.ucv.ro/AUCSSE/0043v1-021.pdf
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    References listed on IDEAS

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    1. Adam Geršl & Jakub Seidler, 2012. "Credit Growth and Countercyclical Capital Buffers: Empirical Evidence from Central and Eastern European Countries," Working Papers IES 2012/3, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, revised Feb 2012.
    2. Charles Goodhart & Boris Hofmann & Miguel Segoviano, 2004. "Bank Regulation and Macroeconomic Fluctuations," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 20(4), pages 591-615, Winter.
    3. Rafael Repullo & Javier Suarez, 2013. "The Procyclical Effects of Bank Capital Regulation," The Review of Financial Studies, Society for Financial Studies, vol. 26(2), pages 452-490.
    4. Adam Gersl & Jakub Seidler, 2012. "Excessive Credit Growth and Countercyclical Capital Buffers in Basel III: An Empirical Evidence from Central and East European Countries," ACTA VSFS, University of Finance and Administration, vol. 6(2), pages 91-107.
    5. Berger, Allen N. & Udell, Gregory F., 2004. "The institutional memory hypothesis and the procyclicality of bank lending behavior," Journal of Financial Intermediation, Elsevier, vol. 13(4), pages 458-495, October.
    6. Ben S. Bernanke & Mark Gertler, 1995. "Inside the Black Box: The Credit Channel of Monetary Policy Transmission," Journal of Economic Perspectives, American Economic Association, vol. 9(4), pages 27-48, Fall.
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    More about this item

    Keywords

    monetary policy; central banks; procyclicality; countercyclical measures; Basel III; capital requirements;
    All these keywords.

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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