01885cas a2200241 a 4500 AALejournalIMF019196 230101c9999 xx r poo 0 0eng d 5.00 USD 9781498312097 1018-5941 BD-DhAAL BD-DhAAL Wezel, Torsten. Conceptual Issues in Calibrating the Basel III Countercyclical Capital Buffer / Torsten Wezel. Washington, D.C. : International Monetary Fund, 2019. 1 online resource (27 pages) IMF Working Papers <strong>Off-Campus Access:</strong> No User ID or Password Required <strong>On-Campus Access:</strong> No User ID or Password Required Electronic access restricted to authorized BRAC University faculty, staff and students This paper discusses issues in calibrating the countercyclical capital buffer (CCB) based on a sample of EU countries. It argues that the main indicator for buffer decisions under the Basel III framework, the credit-to-GDP gap, does not always work best in terms of covering bank loan losses that go beyond what could be expected from economic downturns. Instead, in the case of countries with short financial cycles and/or low financial deepening such as transition and developing economies, the Basel gap is shown to work best when computed with a low, smoothing factor and adjusted for the degree of financial deepening. The paper also analyzes issues in calibrating an appropriate size of the CCB and, using a loss function approach, points to a tradeoff between stability of the buffer size and cost efficiency considerations. Mode of access: Internet IMF Working Papers; Working Paper ; No. 2019/086 Full text available on IMF http://elibrary.imf.org/view/journals/001/2019/086/001.2019.issue-086-en.xml IMF e-Library