IDEAS home Printed from https://ideas.repec.org/a/wly/finmar/v14y2005i5p329-348.html
   My bibliography  Save this article

Countercyclical Capital and Currency Dependence

Author

Listed:
  • Jón Daníelsson
  • Ásgeir Jónsson

Abstract

The introduction of risk sensitive bank capital charges into currency dependent economies exasperates the inherent procyclicality of banking regulations and frustrates the conduct of monetary policy. The authors argue that, by requiring capital charges resulting from foreign currency lending to be denominated in the same foreign currency, the capital charge becomes countercyclical.

Suggested Citation

  • Jón Daníelsson & Ásgeir Jónsson, 2005. "Countercyclical Capital and Currency Dependence," Financial Markets, Institutions & Instruments, John Wiley & Sons, vol. 14(5), pages 329-348, December.
    • Handle: RePEc:wly:finmar:v:14:y:2005:i:5:p:329-348
    DOI: 10.1111/j.0963-8008.2005.00110.x
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/j.0963-8008.2005.00110.x
    Download Restriction: no
    File URL: https://libkey.io/10.1111/j.0963-8008.2005.00110.x?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Barry Eichengreen & Ricardo Hausmann & Ugo Panizza, 2007. "Currency Mismatches, Debt Intolerance, and the Original Sin: Why They Are Not the Same and Why It Matters," NBER Chapters, in: Capital Controls and Capital Flows in Emerging Economies: Policies, Practices, and Consequences, pages 121-170, National Bureau of Economic Research, Inc.
    2. Edward I. Altman & Andrea Resti & Andrea Sironi, 2002. "The link between default and recovery rates: effects on the procyclicality of regulatory capital ratios," BIS Working Papers 113, Bank for International Settlements.
    3. Charles Bean, 2003. "Asset Prices, Financial Imbalances and Monetary Policy: Are Inflation Targets Enough?," RBA Annual Conference Volume (Discontinued), in: Anthony Richards & Tim Robinson (ed.),Asset Prices and Monetary Policy, Reserve Bank of Australia.
    4. Bernanke, Ben & Gertler, Mark & Gilchrist, Simon, 1996. "The Financial Accelerator and the Flight to Quality," The Review of Economics and Statistics, MIT Press, vol. 78(1), pages 1-15, February.
    5. Carmen M. Reinhart & Graciela L. Kaminsky, 1999. "The Twin Crises: The Causes of Banking and Balance-of-Payments Problems," American Economic Review, American Economic Association, vol. 89(3), pages 473-500, June.
    6. Carmen M. Reinhart & Graciela L. Kaminsky, 1999. "The Twin Crises: The Causes of Banking and Balance-of-Payments Problems," American Economic Review, American Economic Association, vol. 89(3), pages 473-500, June.
    7. repec:hal:wpspec:info:hdl:2441/324 is not listed on IDEAS
    8. repec:hal:spmain:info:hdl:2441/324 is not listed on IDEAS
    9. Claudio Borio & Craig Furfine & Philip Lowe, 2001. "Procyclicality of the financial system and financial stability: issues and policy options," BIS Papers chapters, in: Bank for International Settlements (ed.), Marrying the macro- and micro-prudential dimensions of financial stability, volume 1, pages 1-57, Bank for International Settlements.
    10. Hausmann, Ricardo & Panizza, Ugo & Stein, Ernesto, 2001. "Why do countries float the way they float?," Journal of Development Economics, Elsevier, vol. 66(2), pages 387-414, December.
    11. Flandreau, Marc & Sussman, Nathan, 2004. "Old Sins: Exchange Rate Clauses and European Foreign Lending in the 19th Century," CEPR Discussion Papers 4248, C.E.P.R. Discussion Papers.
    12. 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.
    13. Anne O. Krueger, 2000. "Conflicting Demands on the International Monetary Fund," American Economic Review, American Economic Association, vol. 90(2), pages 38-42, May.
    14. Morris Goldstein & Philip Turner, 2004. "Controlling Currency Mismatches in Emerging Markets," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 373, April.
    15. Jeffery D. Amato & Andrew Filardo & Gabriele Galati & Goetz von Peter & Feng Zhu, 2005. "Research on exchange rates and monetary policy: an overview," BIS Working Papers 178, Bank for International Settlements.
    16. Philip Lowe & Claudio Borio, 2002. "Asset prices, financial and monetary stability: exploring the nexus," BIS Working Papers 114, Bank for International Settlements.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Bruce N. Lehmann & David M. Modest, 1985. "The Empirical Foundations of the Arbitrage Pricing Theory I: The Empirical Tests," NBER Working Papers 1725, National Bureau of Economic Research, Inc.
    2. Juan Amador & José Gómez-González & Andrés Pabón, 2013. "Loan growth and bank risk: new evidence," Financial Markets and Portfolio Management, Springer;Swiss Society for Financial Market Research, vol. 27(4), pages 365-379, December.
    3. Davis, E. Philip & Zhu, Haibin, 2011. "Bank lending and commercial property cycles: Some cross-country evidence," Journal of International Money and Finance, Elsevier, vol. 30(1), pages 1-21, February.
    4. Pierre-Olivier Gourinchas & Maurice Obstfeld, 2012. "Stories of the Twentieth Century for the Twenty-First," American Economic Journal: Macroeconomics, American Economic Association, vol. 4(1), pages 226-265, January.
    5. Alessandra Canepa & Fawaz Khaled, 2018. "Housing, Housing Finance and Credit Risk," IJFS, MDPI, vol. 6(2), pages 1-23, May.
    6. Antunes, António & Bonfim, Diana & Monteiro, Nuno & Rodrigues, Paulo M.M., 2018. "Forecasting banking crises with dynamic panel probit models," International Journal of Forecasting, Elsevier, vol. 34(2), pages 249-275.
    7. corrinne ho & robert n mccauley, 2004. "Living with flexible exchange rates:," International Finance 0411003, University Library of Munich, Germany.
    8. Gabriel Jiménez & Jesús Saurina, 2006. "Credit Cycles, Credit Risk, and Prudential Regulation," International Journal of Central Banking, International Journal of Central Banking, vol. 2(2), May.
    9. A. G. Malliaris, 2005. "Global monetary instability: The role of the IMF, the EU and NAFTA," World Scientific Book Chapters, in: Economic Uncertainty, Instabilities And Asset Bubbles Selected Essays, chapter 20, pages 323-343, World Scientific Publishing Co. Pte. Ltd..
    10. Lorenzo Menna & Martin Tobal, 2018. "Financial and price stability in emerging markets: the role of the interest rate," BIS Working Papers 717, Bank for International Settlements.
    11. Douglas W. Diamond & Yunzhi Hu & Raghuram G. Rajan, 2020. "The Spillovers from Easy Liquidity and the Implications for Multilateralism," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 68(1), pages 4-34, March.
    12. Alan M. Taylor, 2015. "Credit, Financial Stability, and the Macroeconomy," Annual Review of Economics, Annual Reviews, vol. 7(1), pages 309-339, August.
    13. Brandão-Marques, Luis & Chen, Qianying & Raddatz, Claudio & Vandenbussche, Jérôme & Xie, Peichu, 2022. "The riskiness of credit allocation and financial stability," Journal of Financial Intermediation, Elsevier, vol. 51(C).
    14. Eduardo Wiesner, 2008. "The Political Economy of Macroeconomic Policy Reform in Latin America," Books, Edward Elgar Publishing, number 12913.
    15. Evgenidis, Anastasios & Tsagkanos, Athanasios, 2017. "Asymmetric effects of the international transmission of US financial stress. A threshold-VAR approach," International Review of Financial Analysis, Elsevier, vol. 51(C), pages 69-81.
    16. Baxa, Jaromír & Horváth, Roman & Vašíček, Bořek, 2013. "Time-varying monetary-policy rules and financial stress: Does financial instability matter for monetary policy?," Journal of Financial Stability, Elsevier, vol. 9(1), pages 117-138.
    17. Karsten R. Gerdrup, 2003. "Three episodes of financial fragility in Norway since the 1890s," BIS Working Papers 142, Bank for International Settlements.
    18. Szilágyi, Katalin & Kiss, Áron, 2014. "Miért más ez a válság, mint a többi?. Az adósságleépítés szerepe a nagy recesszióban [Why is this crisis different?. The role of deleveraging in the great recession]," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(9), pages 949-974.
    19. Goetz von Peter, 2003. "A Unified Approach to Credit Crunches, Financial Instability, and Banking Crises," Macroeconomics 0312006, University Library of Munich, Germany.
    20. Silva, Walmir & Kimura, Herbert & Sobreiro, Vinicius Amorim, 2017. "An analysis of the literature on systemic financial risk: A survey," Journal of Financial Stability, Elsevier, vol. 28(C), pages 91-114.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wly:finmar:v:14:y:2005:i:5:p:329-348. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.