Comparing the Impacts of Financial Regulation in Australia and the United States via Simulation with Country-Specific Financial CGE Models

Jason Nassios, James Giesecke, Peter B. Dixon, Maureen T. Rimmer
2016 Social Science Research Network  
Jurisdiction-specific differences exist in the implementation of the Basel III capital adequacy requirements. This paper highlights one reason inhomogeneous cross-country capital regulations may materialise, by illustrating how the impacts of regulatory change [in this case, a rise in bank capital adequacy ratios (CARs)] can be affected by jurisdiction-specific differences in the structure of the financial sector. To this end, we begin by summarising the development of a new financial
more » ... financial computable general equilibrium (financial CGE) model of the U.S. called USAGE2F. We then illustrate how explicit recognition of financial stocks and flows can broaden the scope of CGE analyses to include the effects of changes in CARs of financial agents, e.g., the commercial banks. Finally, our results are compared to findings of a similar policy scenario in Australia, with differences in the results largely attributable to cross-country differences in financial structure. JEL classification: E17, E44, G21, C68
doi:10.2139/ssrn.2797896 fatcat:rtzqgejyqfhxrk5qbdedzizf3a