Score contribution per author:
α: calibrated so average coauthorship-adjusted count equals average raw count
This paper examines the impact of higher bank capital requirements on the real economy. We find, using a range of macroeconomic models used at the European Central Bank, that, in the long run, a 1 percent bank capital requirement increase has a small impact on real activity. In the short run, GDP declines by 0.15 to 0.35 percent. When banks are able to reduce their voluntary capital buffers and dividend payouts and when monetary policy reacts strongly to inflation deviations from target, the real impact of higher capital requirements is significantly reduced.