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Countercyclical Capital and Currency Dependence
Author(s) -
Daníelsson Jón,
Jónsson Ásgeir
Publication year - 2005
Publication title -
financial markets, institutions and instruments
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.386
H-Index - 23
eISSN - 1468-0416
pISSN - 0963-8008
DOI - 10.1111/j.0963-8008.2005.00110.x
Subject(s) - currency , monetary economics , capital (architecture) , economics , foreign capital , foreign exchange risk , monetary policy , international economics , business , financial system , macroeconomics , foreign direct investment , archaeology , history
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.