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The Macrodynamics of Operating Income in the Norwegian Banking Sector

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  • Henrik Andersen
  • Sigbjørn Atle Berg
  • Eilev S Jansen

Abstract

The banking literature contains only a handful of studies of how bank revenues vary over the business cycle, and nearly all of these studies look exclusively on the net interest margin. The general conclusion has been that the margin tends to increase during recessions and decrease during booms. In this paper, we study the effect of macroeconomic variables on the operating income in the Norwegian banking sector. We contribute to the existing literature by looking at how net interest income as well as fee income varies over the cycle in an error correction framework, which allows us to identify both short-term and long-term relationships. Our paper also differs from most previous studies by taking into account the volume effect as well as the price effect of the business cycle.

Suggested Citation

  • Henrik Andersen & Sigbjørn Atle Berg & Eilev S Jansen, 2012. "The Macrodynamics of Operating Income in the Norwegian Banking Sector," The IUP Journal of Bank Management, IUP Publications, vol. 0(1), pages 7-29, February.
    • Handle: RePEc:icf:icfjbm:v:10:y:2012:i:1:p:7-29
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