The Capital Requirements Of Commercial Banks And Economic Fluctuation Based On New Keynesian DSGE Model

It is very important to know the relations between commercial banks’ capital requirements and economic fluctuation in macroeconomic and financial area, which involve the core issues: business cycle and the reform of financial regulatory regime. Given there are few literatures about Chinese banks’ capital requirements and economic fluctuation. Thus, this paper examined the relationship between Chinese commercial banks’ capital requirements and economic fluctuation based on New Keynesian DSGE model.Firstly, this paper built a five-sector New Keynesian DSGE model. Then, we optimized the five-sector’s behavior equations respectively. What’s more, we analyzed the model’s steady state and examined the real economy state and nominal variables state. Meanwhile, we log-linearized the model for constructing a complete differential equations.Secondly, this paper used Chinese economic data to calibrate the model. Furthermore, we used Blanchard-Khan method to solve the differential equations for impulse response analysis.Based on impulse response analysis, we can give some conclusions:(i) In technology shock, Basel-II regime is slightly lower pro-cyclical than Basel-I regime; because of the increasing capital requirements, The existence of capital requirements of DSGE model with full impact of the banking sector arising from family and vendors than containing only two departments DSGE model more complex and intense. Based on the impulse response analysis, this paper built social welfare function and constructed Social welfare loss function to analyze the welfare loss situation under different regulatory. The conclusions is that three Basel regimes have all resulted in the loss of social welfare, and Basel-I’s loss is the largest and Basel-II’s loss is the smallest.Finally, Conclusions for empirical research and normative research, combined with the reality of China’s banking sector, aiming at monetary policy, the implementation of the New Capital Accord proposes policy recommendations for bank regulatory capital reforms and macroeconomic policy provides empirical reference.