Higher capital requirements lead to lower lending, study by Calomiris finds
Finds low interaction between monetary policy and capital requirements
Higher capital requirements prompt banks to issue fewer loans, according to a working paper authored by a group of economists, including Columbia Business School professor Charles Calomiris, which claims to offer the first empirical estimate of how lenders react to parallel changes in monetary policy and capital requirements.
The paper, published today by the Bank of England (BoE) and co-written with Shekhar Aiyar of the International Monetary Fund and the BoE's Tomasz Wieladek, argues that
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