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How Resilient is the German Banking System to Macroeconomic Shocks?

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Author Info

  • Jonas Dovern
  • Carsten-Patrick Meier
  • Johannes Vilsmeier

Abstract

Macro-stress testing studies often rely on rather short sample periods due to the limited availability of banking data. They may fail to appropriately account for the cyclicality in the interaction between the banking system and macroeconomic developments. In this paper we use a newly constructed data set on German banks’ income and loss statements over the past 36 years to model the interaction between the banking sector and the macroeconomy. Our identified-VAR analysis indicates that the level of stress in the banking sector is strongly affected by monetary policy shocks. The results rationalize the active behavior of central banks observed during periods of financial market crises

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Bibliographic Info

Paper provided by Kiel Institute for the World Economy in its series Kiel Working Papers with number 1419.

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Length: 21 pages
Date of creation: Apr 2008
Date of revision:
Handle: RePEc:kie:kieliw:1419

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Keywords: stress testing; banking; VAR;

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References

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Citations

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Cited by:
  1. Boysen-Hogrefe, Jens & Dovern, Jonas & Groll, Dominik & van Roye, Björn & Scheide, Joachim, 2010. "Droht in Deutschland eine Kreditklemme?," Kiel Discussion Papers 472/473, Kiel Institute for the World Economy (IfW).
  2. Kerstin Bernoth & Andreas Pick, 2009. "Forecasting the fragility of the banking and insurance sector," DNB Working Papers 202, Netherlands Central Bank, Research Department.
  3. Hadad, Muliaman D. & Agusman, Agusman & Monroe, Gary S. & Gasbarro, Dominic & Zumwalt, James Kenton, 2011. "Market discipline, financial crisis and regulatory changes: Evidence from Indonesian banks," Journal of Banking & Finance, Elsevier, vol. 35(6), pages 1552-1562, June.
  4. Serafeim Tsoukas, 2012. "Firm Survival and Financial Development: Evidence from a Panel of Emerging Asian Economies," Working Papers 142012, Hong Kong Institute for Monetary Research.
  5. Sumon Kumar Bhaumik & Vinh Dang & Ali M. Kutan, 2010. "Implications of bank ownership for the credit channel of monetary policy transmission: Evidence from India," William Davidson Institute Working Papers Series wp988, William Davidson Institute at the University of Michigan.
  6. Kim Abildgren, 2012. "Business cycles, monetary transmission and shocks to financial stability: empirical evidence from a new set of Danish quarterly national accounts 1948-2010," Working Paper Series 1458, European Central Bank.
  7. Stefano Puddu, 2013. "Real Sector and Banking System: Real and Feedback Effects. A Non-Linear VAR Approach," IRENE Working Papers 13-01, IRENE Institute of Economic Research.
  8. Paolo Guarda & Abdelaziz Rouabah & John Theal, 2012. "An MVAR framework to capture extreme events in macro-prudential stress tests," Working Paper Series 1464, European Central Bank.
  9. Blank, Sven & Dovern, Jonas, 2009. "What macroeconomic shocks affect the German banking system? Analysis in an integrated micro-macro model," Discussion Paper Series 2: Banking and Financial Studies 2009,15, Deutsche Bundesbank, Research Centre.

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