## Monetary Policy with a touch of Basel

_IMF Working Papers, October 1, 2001_

## Source details

**Canonical URL:** [Monetary Policy with a touch of Basel](https://www.imf.org/en/publications/wp/issues/2016/12/30/monetary-policy-with-a-touch-of-basel-15381)

## Other formats

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## Bibliographic details
- Authors: Ralph Chami, Thomas F. Cosimano
- Published: October 1, 2001
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781451857030.001

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### Authors and publication
- By Ralph Chami, Thomas F. Cosimano
- October 1, 2001
- IMF Working Papers, Working Paper No. 2001/151
- Issue: 151
- Volume: 2001
- Pages: 47
- DOI: https://doi.org/10.5089/9781451857030.001
- Stock No: WPIEA1512001
- ISBN: 9781451857030
- ISSN: 1018-5941
- Citation example (from source): Ralph Chami, and Thomas F. Cosimano "Monetary Policy with a touch of Basel", IMF Working Papers 2001, 151 (2001), accessed 9/9/2026, https://doi.org/10.5089/9781451857030.001

### Central thesis
- The traditional view that monetary policy operates mainly by manipulating bank reserves is less applicable when only a small portion of bank deposits are subject to reserve requirements.
- Over the last decade, capital requirements have effectively replaced reserve requirements as the main constraint on the behavior of banks.
- The paper identifies a "bank balance-sheet channel" of monetary policy, which operates through the impact on the money stock and the economy.

### Key findings and concepts
- Capital requirements (Basel) have become the predominant constraint shaping bank behavior in place of reserve requirements.
- The "bank balance-sheet channel" is a distinct mechanism through which monetary policy affects banks, the money stock, and economic activity.
- Subjects covered include: Bank credit; Banking; Basel Core Principles; Capital adequacy requirements; Deposit rates; Financial institutions; Financial regulation and supervision; Financial services; Loans; Money.

### Keywords and analytical focus
- accelerator effect
- bank behavior
- bank capital
- Bank credit
- banking industry
- Basel Core Principles
- Capital adequacy requirements
- capital constraint
- capital requirements
- Deposit rates
- Global
- loan rate
- Loans
- monetary policy
- WP

### Policy implications and relevance
- Monetary policy analysis should account for capital adequacy constraints when assessing how policy changes propagate through banks to the money stock and the real economy.
- Basel capital requirements alter the transmission mechanism of monetary policy, implying that traditional reserve-focused frameworks may be insufficient for policy design and evaluation.

*Source: IMF Working Paper "Monetary Policy with a touch of Basel" (Ralph Chami and Thomas F. Cosimano), October 1, 2001.*

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_Source: https://www.imf.org/en/publications/wp/issues/2016/12/30/monetary-policy-with-a-touch-of-basel-15381_