The introduction of Basel II has rised concerns about the possible impact of risk-sensitive capital requirement on the business cycle. Several approaches have been proposed to deal with the procyclicality issue: a general equilibrium model is an appropriate framework for a comprehensive analysis of different proposals since it allows to account for banks endogenous strategies in relation to the other agents’ behaviour. The set up of a model to evaluate di¤erent rating systems in relation to the procyclicality issue is presented.
Pederzoli, C., Torricelli, C. (2007). Banks' optimal rating system and procyclicality. COMMUNICATIONS TO SIMAI CONGRESS, 2 [10.1685/CSC06147].
Banks' optimal rating system and procyclicality
PEDERZOLI, CHIARA;
2007
Abstract
The introduction of Basel II has rised concerns about the possible impact of risk-sensitive capital requirement on the business cycle. Several approaches have been proposed to deal with the procyclicality issue: a general equilibrium model is an appropriate framework for a comprehensive analysis of different proposals since it allows to account for banks endogenous strategies in relation to the other agents’ behaviour. The set up of a model to evaluate di¤erent rating systems in relation to the procyclicality issue is presented.
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