Macroeconomic Effects of Banking Sector Losses across Structural Models

This paper, which addresses a number of aspects of macroprudential policies, was produced as part of the BIS Consultative Council for the Americas Research Network project "Incorporating financial stability consideration into central bank policy models".

The macro spillover effects of capital shortfalls in the financial intermediation sector are compared across five dynamic equilibrium models for policy analysis. Although all the models considered share antecedents and a methodological core, each model emphasizes different transmission channels. This approach delivers "model-based confidence intervals" for the real and financial effects of shocks originating in the financial sector. The range of outcomes predicted by the five models is only slightly narrower than confidence intervals produced by simple vector autoregressions.

JEL classification: E32, E44, E47

Keywords: banks, DSGE models, capital requirements, bank losses