A New Look at Bank Capital

AuthorJihad Dagher - Giovanni Dell'Ariccia - Luc Laeven - Lev Ratnovski - Hui Tong
Pages1-4
IMFIMF
Volume 17, Number 3 September 2016
www.imf.org/researchbulletin
B U L L E T I N
1
Does Growth Create Jobs? Evidence for
Advanced and Developing Economies
Zidong An, Nathalie Gonzalez Prieto, Prakash Loungani
andSaurabhMish ra
Global job
creation
remains
sluggish,
prompting
calls for policy
actions to raise economic grow th. Will growth create jobs? Recent IMF research
documents a striking var iation among countries in the extent to which employment
responds to GDP growth over the course of a ye ar. In some countries, labor market s
are quite responsive: when growth pick s up, employment goes up and unemployment
falls; in other countrie s the response is quite muted. Thus, a pick-up in growth—
through aggregate demand s timulus for instance—will result in more jobs, but
the extent of job creation in the shor t run could vary sharply across countries.
Some structural meas ures can thus serve as useful compleme ntary policies, as also
discussed in IMF research.
The global unemployment rate increase d sharply during the Great Recession
to a peak of 6.2 percent in 200 9 (Figure 1a). The increase in unemployment in
A New Look at Bank Capital
Jihad Dagher, Giovanni Dell’Ariccia, Luc Laeven, Lev Ratnovski, and
HuiTong
This study sugge sts that bank capital in the range of 15–23 percent of risk-
weighted assets would have pre vented most of the past banking cr ises in advanced
economies. The bene fits of even higher bank capital are small. Transition costs to
higher capital standards c an be substantial, so any new minimal s tandards should
be imposed gradually and in favorable economic circum stances.
The global fi nancial crisis and its aftermat h highlighted how distressed ban ks can
undermine the rea l economy. Bank capital prior to the crisi s was in retrospect too
low to withstand plausible shocks. A la rge part of the policy response, according ly,
focused on increasing ba nk capital ratios and other forms of loss absorption.
In This Issue
1 A New Look
atBankCapital
1 Does Growth
CreateJobs? Evidence
for Advanced and
DevelopingEconomies
9 Q&A: Seven Questions on
Rethinking the Oil Market
in the Aftermath of the
2014–16 Price Slump
13 Seventeenth Jacques
Polak Annual
ResearchConference
14 IMF Working Papers
18 IMF Economic Review
19 Recommended Readings
from IMF Publications
20 Staff Discussion Notes
Read more on page 2
Read more on page 5
Research Summaries
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