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Financial (in)stability in Romania: the implications of Basel III

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  • E2 - Macroeconomics: Consumption
  • Saving
  • Production
  • Employment
  • And Investment
  • E5 - Monetary Policy
  • Central Banking
  • And The Supply Of Money And Credit
  • G2 - Financial Institutions And Services


In this paper I propose a medium scale Dynamic Stochastic General Equilibrium model for emphasizing the effects of the new Basel III Agreement for Romania’s financial stability. This model has similar structures as those developed by Walque et al. (2010) and Roger and Vlček (2011) but, combining their features, it results a more comprehensive framework. First of all, I calibrated this model in order to obtain the deep parameters. After calibration, I used several shocks to conduct simulations for analyze if the model can capture the behavior of the economy. In the end of this study, I estimate the model using Bayesian techniques to match the data of the Romanian economy.

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