Banks' riskiness over the business cycle: a panel analysis on Italian intermediaries
AbstractA comprehensive investigation is provided on the issue of the possible cyclical nature of banks' behaviour using a large panel of Italian intermediaries over the period 1985 to 2002. Estimating both static and dynamic models, the article investigates whether loan loss provisions and non-performing loans show a cyclical pattern. The econometric results confirm that business cycle affects banks' loan loss provisions and new bad debts. The impact of recessionary conditions is significant and long-lasting. Moreover, the empirical evidence provides some support for the income-smoothing hypothesis. The estimated relations may be employed to carry out stress tests to assess the effects of macroeconomic shocks on banks' balance sheets.
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Bibliographic InfoArticle provided by Taylor and Francis Journals in its journal Applied Financial Economics.
Volume (Year): 17 (2007)
Issue (Month): 2 ()
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Web page: http://www.tandf.co.uk/journals/routledge/09603107.html
Other versions of this item:
- Mario Quagliariello, 2006. "BanksÂ’ Riskiness Over the Business Cicle: a Panel Analysis on Italian Intermediaries," Temi di discussione (Economic working papers) 599, Bank of Italy, Economic Research and International Relations Area.
- E30 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - General (includes Measurement and Data)
- E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
- E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
- G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
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