sensitive to macroeconomic conditions have higher capital ratios, consistent with a “precautionary” view of bank capital. …The CLASS model is a top-down capital stress testing framework that projects the effect of different macroeconomic … industry capital gap relative to a target ratio at different points in time under a common stressful macroeconomic scenario …

capital coexist with older, less productive vintages. A reduction in the cost of investment raises both the quantity and … productivity of capital simultaneously. The model induces a simple relationship between the relative price of investment goods and …