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Countercyclical Banking Capital Buffers in a DSGE Model

Dairo Ayiber
Estrada
Santiago
Caicedo
Mariana
Laverde
Sábado, 1 Septiembre 2012

In this document we develop a DSGE model to analyze the effect that a consumption boom and a productivity shock have over financial stability and macroeconomic variables, in both, an economy with and without Basel III capital requirements and earnings reinvestment rule. The results suggest that Basel III requirements have a positive impact over financial stability variables and that additional capital requirements do not restrict banking activity.