Cyclical Behavior of Banks Capital and Countercyclical Buffer of Basel III: Empirical Study on Palestinian Banks

Volume 4, Issue 5, October 2019     |     PP. 115-125      |     PDF (235 K)    |     Pub. Date: August 19, 2019
DOI:    229 Downloads     6861 Views  

Author(s)

Ahmed N. K. Alfarra, School of Management, Harbin Institute of Technology, Harbin, 150001, China
Hui Xiaofeng, School of Management, Harbin Institute of Technology, Harbin, 150001, China
Ehsan Chitsaz, School of Management, Harbin Institute of Technology, Harbin, 150001, China
Jaleel Ahmed, School of Management, Harbin Institute of Technology, Harbin, 150001, China

Abstract
In this paper, we investigate the countercyclical buffer addressed in the Basel III framework. The ‘countercyclical buffer ‘targets at the extenuation of the supposedly harmful behavior of bank capital. The size of the buffer after the stepwise growths during the application stage finally reaches 2.5%. Therefore, the presented focus is on understanding to what extent does an increase in capital reserves affect the Palestinian economy. This paper uses examines mostly annual data by GDP as a deputation for the commercial cycle over the period 1996 – 2014. The analysis shows that the countercyclical buffer does not affect the Palestinian economy, which identifies a defining pro-cyclical behavior of Palestinian banks' capital.

Keywords
Basel III, Business cycle, Capital buffer, Autoregressive Distributed Lag Model (ADL), Countercyclical buffer.

Cite this paper
Ahmed N. K. Alfarra, Hui Xiaofeng, Ehsan Chitsaz, Jaleel Ahmed, Cyclical Behavior of Banks Capital and Countercyclical Buffer of Basel III: Empirical Study on Palestinian Banks , SCIREA Journal of Mathematics. Volume 4, Issue 5, October 2019 | PP. 115-125.

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