The cyclical behavior of bank capital buffers in an emerging economy: size do matters
AbstractUsing a panel of Colombian banks and quarterly data between 1996:1 and 2010:3, we study the relationship between short-run adjustments in bank capital buffers and the business cycle. We follow a partial adjustment framework and control for several variables that have been identified as important determinants of bank capital buffers in previous studies, and find that bank capital buffers vary overthe business cycle. We are able to identify a negative co-movement of capital buffers and and the business cycle. However, we also find that capital buffers of small and large banks behave asymmetrically during the business cycle. While the former appear to be constant over time, once the appropriate set of control variables is used, the latter present a countercyclical behavior. Our results suggest the possible need of the implementation of regulatory policy measures in developing countries.
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Bibliographic InfoPaper provided by UNIVERSIDAD DEL ROSARIO in its series DOCUMENTOS DE TRABAJO with number 008275.
Date of creation: 31 Mar 2011
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Bank capital bu§ers; Credit risk; Regulation; Colombia;
Find related papers by JEL classification:
- C26 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Instrumental Variables (IV) Estimation
- G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
- G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
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- Skander Van den Heuvel, 2006. "The Bank Capital Channel of Monetary Policy," 2006 Meeting Papers 512, Society for Economic Dynamics.
- Gómez-González, José Eduardo & Hinojosa, Inés Paola Orozco, 2010. "Estimation of conditional time-homogeneous credit quality transition matrices," Economic Modelling, Elsevier, vol. 27(1), pages 89-96, January.
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