Bank income and profits over the business and interest rate cycle
AbstractIf and how the conduct of the banking sector contributes to the propagation of aggregate shocks has become a prominent empirical research question. This study explores what a cyclicality analysis of net interest margins and spreads, as well as profitability figures, can contribute to the discussion. By using time series data for the Austrian banking sector from 1987 to 2005, it is found that many of these measures fall in economic upturns. Net interest income from granting loans and taking deposits from non-banks, however, evolves procyclically and increases with rising interest rates. Combined with the observation that the margins’ countercyclical variations are rather small, it can be concluded that there is no striking evidence for a financial accelerator caused by the Austrian banking sector.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Department of Economics, Johannes Kepler University Linz, Austria in its series Economics working papers with number 2006-11.
Date of creation: Jul 2006
Date of revision:
Bank interest margins; business cycles; financial accelerator; impulse response analysis;
Find related papers by JEL classification:
- E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
- G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-12-09 (All new papers)
- NEP-BAN-2006-12-09 (Banking)
- NEP-BEC-2006-12-09 (Business Economics)
- NEP-CBA-2006-12-09 (Central Banking)
- NEP-MAC-2006-12-09 (Macroeconomics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Sander,Harald & Kleimeier,Stefanie, 2003.
"Convergence in Eurozone retail banking? What interest rate pass-through tells us about monetary policy transmission, competition and integration,"
051, Maastricht University, Maastricht Research School of Economics of Technology and Organization (METEOR).
- Sander, Harald & Kleimeier, Stefanie, 2004. "Convergence in euro-zone retail banking? What interest rate pass-through tells us about monetary policy transmission, competition and integration," Journal of International Money and Finance, Elsevier, vol. 23(3), pages 461-492, April.
- Ben Bernanke & Mark Gertler & Simon Gilchrist, 1994.
"The Financial Accelerator and the Flight to Quality,"
NBER Working Papers
4789, National Bureau of Economic Research, Inc.
- Bernanke, Ben & Gertler, Mark & Gilchrist, Simon, 1996. "The Financial Accelerator and the Flight to Quality," The Review of Economics and Statistics, MIT Press, vol. 78(1), pages 1-15, February.
- Simon G. Gilchrist & Ben Bernanke & Mark Gertler, 1994. "The financial accelerator and the flight to quality," Finance and Economics Discussion Series 94-18, Board of Governors of the Federal Reserve System (U.S.).
- Christopher A. Sims & Tao Zha, 1999.
"Error Bands for Impulse Responses,"
Econometric Society, vol. 67(5), pages 1113-1156, September.
- Christopher A. Sims & Tao Zha, 1994. "Error Bands for Impulse Responses," Cowles Foundation Discussion Papers 1085, Cowles Foundation for Research in Economics, Yale University.
- Christopher A. Sims & Tao Zha, 1995. "Error bands for impulse responses," Working Paper 95-6, Federal Reserve Bank of Atlanta.
- Tom Doan, . "RATS programs to replicate Sims and Zha(1999) "Error Bands for Impulse Responses"," Statistical Software Components RTZ00145, Boston College Department of Economics.
- Corvoisier, Sandrine & Gropp, Reint, 2001.
"Bank Concentration and Retail Interest Rates,"
Working Paper Series
0072, European Central Bank.
- Angbazo, Lazarus, 1997. "Commercial bank net interest margins, default risk, interest-rate risk, and off-balance sheet banking," Journal of Banking & Finance, Elsevier, vol. 21(1), pages 55-87, January.
- Benedikt Braumann, 2004. "Tu Felix Austria: Evidence for a de-celerator in financial reform," International Economics and Economic Policy, Springer, vol. 1(1), pages 53-72, 03.
- Ben S. Bernanke & Mark Gertler, 1995.
"Inside the Black Box: The Credit Channel of Monetary Policy Transmission,"
Journal of Economic Perspectives,
American Economic Association, vol. 9(4), pages 27-48, Fall.
- Ben S. Bernanke & Mark Gertler, 1995. "Inside the Black Box: The Credit Channel of Monetary Policy Transmission," NBER Working Papers 5146, National Bureau of Economic Research, Inc.
- J.A. Bikker & K. Haaf, 2000.
"Competition, concentration and their relationship: an empirical analysis of the banking industry,"
Research Series Supervision (discontinued)
30, Netherlands Central Bank, Directorate Supervision.
- Bikker, Jacob A. & Haaf, Katharina, 2002. "Competition, concentration and their relationship: An empirical analysis of the banking industry," Journal of Banking & Finance, Elsevier, vol. 26(11), pages 2191-2214, November.
- J.A. Bikker & K. Haaf, 2001. "Competition, Concentration and their Relationship: an EmpiricalAnalysis of the Banking Industry," DNB Staff Reports (discontinued) 68, Netherlands Central Bank.
- Pesaran, H. Hashem & Shin, Yongcheol, 1998.
"Generalized impulse response analysis in linear multivariate models,"
Elsevier, vol. 58(1), pages 17-29, January.
- Pesaran, M. H. & Shin, Y., 1997. "Generalised Impulse Response Analysis in Linear Multivariate Models," Cambridge Working Papers in Economics 9710, Faculty of Economics, University of Cambridge.
- Drakos, Kostas, 2003. "Assessing the success of reform in transition banking 10 years later: an interest margins analysis," Journal of Policy Modeling, Elsevier, vol. 25(3), pages 309-317, April.
- Allen, Linda, 1988. "The Determinants of Bank Interest Margins: A Note," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 23(02), pages 231-235, June.
- Johann Burgstaller, 2006. "The cyclicality of interest rate spreads in Austria: Evidence for a financial decelerator?," Economics working papers 2006-02, Department of Economics, Johannes Kepler University Linz, Austria.
- Michael J. Dueker & Daniel L. Thornton, 1997. "Do bank loan rates exhibit a countercyclical mark-up?," Working Papers 1997-004, Federal Reserve Bank of St. Louis.
- Mody, Ashoka & Taylor, Mark P., 2004. "Financial predictors of real activity and the financial accelerator," Economics Letters, Elsevier, vol. 82(2), pages 167-172, February.
- Brock, Philip L. & Rojas Suarez, Liliana, 2000. "Understanding the behavior of bank spreads in Latin America," Journal of Development Economics, Elsevier, vol. 63(1), pages 113-134, October.
- Maudos, Joaquin & Fernandez de Guevara, Juan, 2003.
"Factors Explaining the Interest Margin in the Banking Sectors of the European Union,"
15252, University Library of Munich, Germany.
- Maudos, Joaquin & Fernandez de Guevara, Juan, 2004. "Factors explaining the interest margin in the banking sectors of the European Union," Journal of Banking & Finance, Elsevier, vol. 28(9), pages 2259-2281, September.
- Angelini, Paolo & Cetorelli, Nicola, 2003. " The Effects of Regulatory Reform on Competition in the Banking Industry," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 35(5), pages 663-84, October.
- Levine, Ross, 2005.
"Finance and Growth: Theory and Evidence,"
Handbook of Economic Growth,
in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 1, chapter 12, pages 865-934
- Koop, Gary & Pesaran, M. Hashem & Potter, Simon M., 1996. "Impulse response analysis in nonlinear multivariate models," Journal of Econometrics, Elsevier, vol. 74(1), pages 119-147, September.
- E. W. Chirwa, 2003. "Determinants of commercial banks' profitability in Malawi: a cointegration approach," Applied Financial Economics, Taylor & Francis Journals, vol. 13(8), pages 565-571.
- Ho, Thomas S. Y. & Saunders, Anthony, 1981. "The Determinants of Bank Interest Margins: Theory and Empirical Evidence," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 16(04), pages 581-600, November.
- R. Glenn Hubbard, 1995. "Is There a `Credit Channel' for Monetary Policy?," NBER Working Papers 4977, National Bureau of Economic Research, Inc.
- R. Glenn Hubbard, 1995. "Is there a "credit channel" for monetary policy?," Proceedings, Federal Reserve Bank of St. Louis, issue May, pages 63-77.
- Richard A. Ashley & Randal J. Verbrugge, 2009. "To difference or not to difference: a Monte Carlo investigation of inference in vector autoregression models," International Journal of Data Analysis Techniques and Strategies, Inderscience Enterprises Ltd, vol. 1(3), pages 242-274.
- Harry Bloch & Michael Olive, 2001. "Pricing over the Cycle," Review of Industrial Organization, Springer, vol. 19(1), pages 99-108, August.
- R. Glenn Hubbard, 1995. "Is there a "credit channel" for monetary policy?," Review, Federal Reserve Bank of St. Louis, issue May, pages 63-77.
- Goddard, John & Molyneux, Phil & Wilson, John O S, 2004. "Dynamics of Growth and Profitability in Banking," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 36(6), pages 1069-90, December.
- Saunders, Anthony & Schumacher, Liliana, 2000. "The determinants of bank interest rate margins: an international study," Journal of International Money and Finance, Elsevier, vol. 19(6), pages 813-832, December.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Ren� B�heim).
If references are entirely missing, you can add them using this form.