Advanced Search
MyIDEAS: Login to save this paper or follow this series

Shocks at large banks and banking sector distress: the Banking Granular Residual

Contents:

Author Info

  • Blank, Sven
  • Buch, Claudia M.
  • Neugebauer, Katja

Abstract

Size matters in banking. In this paper, we explore whether shocks originating at large banks affect the probability of distress of smaller banks and thus the stability of the banking system. Our analysis proceeds in two steps. In a first step, we follow Gabaix (2008a) and construct a measure of idiosyncratic shocks at large banks, the so-called Banking Granular Residual. This measure documents the importance of size effects for the German banking system. In a second step, we incorporate this measure of idiosyncratic shocks at large banks into an integrated stress-testing model for the German banking system following De Graeve et al. (2007). We find that positive shocks at large banks reduce the probability of distress of small banks. --

Download Info

If 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.
File URL: http://econstor.eu/bitstream/10419/27687/1/593864395.PDF
Download Restriction: no

Bibliographic Info

Paper provided by Deutsche Bundesbank, Research Centre in its series Discussion Paper Series 2: Banking and Financial Studies with number 2009,04.

as in new window
Length:
Date of creation: 2009
Date of revision:
Handle: RePEc:zbw:bubdp2:200904

Contact details of provider:
Postal: Postfach 10 06 02, 60006 Frankfurt
Phone: 0 69 / 95 66 - 34 55
Fax: 0 69 / 95 66 30 77
Email:
Web page: http://www.bundesbank.de/
More information through EDIRC

Related research

Keywords: Banking sector distress; size effects; shock propagation; Granular Residual;

Other versions of this item:

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

References listed on IDEAS
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.:
as in new window
  1. Degryse, H.A. & Nguyen, G., 2006. "Interbank Exposures: An Empirical Examination of Contagion Risk in the Belgian Banking System," Discussion Paper, Tilburg University, Tilburg Law and Economic Center 2006-016, Tilburg University, Tilburg Law and Economic Center.
  2. Uhlig, Harald, 1999. "What are the Effects of Monetary Policy on Output? Results from an Agnostic Identification Procedure," CEPR Discussion Papers, C.E.P.R. Discussion Papers 2137, C.E.P.R. Discussion Papers.
  3. Franklin Allen & Douglas Gale, 2004. "Competition and financial stability," Proceedings, Federal Reserve Bank of Cleveland, Federal Reserve Bank of Cleveland, pages 453-486.
  4. Pushkin, Dmitri O & Aref, Hassan, 2004. "Bank mergers as scale-free coagulation," Physica A: Statistical Mechanics and its Applications, Elsevier, Elsevier, vol. 336(3), pages 571-584.
  5. Helmut Elsinger & Alfred Lehar & Martin Summer, 2006. "Risk Assessment for Banking Systems," Management Science, INFORMS, INFORMS, vol. 52(9), pages 1301-1314, September.
  6. J.A. Bikker & K. Haaf, 2001. "Competition, Concentration and their Relationship: an EmpiricalAnalysis of the Banking Industry," DNB Staff Reports (discontinued), Netherlands Central Bank 68, Netherlands Central Bank.
  7. Carmen M. Reinhart & Sara Calvo, 1996. "Capital Flows to Latin America: Is There Evidence of Contagion Effects?," Peterson Institute Press: Chapters, Peterson Institute for International Economics, in: Guillermo A. Calvo & Morris Goldstein & Eduard Hochreiter (ed.), Private Capital Flows to Emerging Markets After the Mexican Crisis, pages 151-171 Peterson Institute for International Economics.
  8. Xavier Gabaix, 2009. "Power Laws in Economics and Finance," Annual Review of Economics, Annual Reviews, Annual Reviews, vol. 1(1), pages 255-294, 05.
  9. Benston, George J, 1972. "Economies of Scale of Financial Institutions," Journal of Money, Credit and Banking, Blackwell Publishing, Blackwell Publishing, vol. 4(2), pages 312-41, May.
  10. De Graeve, F. & Kick, T. & Koetter, M., 2008. "Monetary policy and financial (in)stability: An integrated micro-macro approach," Journal of Financial Stability, Elsevier, Elsevier, vol. 4(3), pages 205-231, September.
  11. Xavier Gabaix, 2009. "The Granular Origins of Aggregate Fluctuations," NBER Working Papers 15286, National Bureau of Economic Research, Inc.
  12. Jacobson, Tor & Lindé, Jesper & Roszbach, Kasper, 2005. "Exploring Interactions between Real Activity and the Financial Stance," Working Paper Series 184, Sveriges Riksbank (Central Bank of Sweden).
  13. Iman van Lelyveld & Franka Liedorp, 2006. "Interbank Contagion in the Dutch Banking Sector: A Sensitivity Analysis," International Journal of Central Banking, International Journal of Central Banking, International Journal of Central Banking, vol. 2(2), May.
  14. Barbara Casu & Claudia Girardone, 2006. "Bank Competition, Concentration And Efficiency In The Single European Market," Manchester School, University of Manchester, vol. 74(4), pages 441-468, 07.
  15. Calvo, Guillermo A. & Mendoza, Enrique, 1997. "Rational Herd Behavior and the Globalization of Securities Markets," Working Papers, Duke University, Department of Economics 97-26, Duke University, Department of Economics.
  16. John H. Boyd & Gianni De Nicolã, 2005. "The Theory of Bank Risk Taking and Competition Revisited," Journal of Finance, American Finance Association, American Finance Association, vol. 60(3), pages 1329-1343, 06.
  17. Upper, Christian & Worms, Andreas, 2004. "Estimating bilateral exposures in the German interbank market: Is there a danger of contagion?," European Economic Review, Elsevier, Elsevier, vol. 48(4), pages 827-849, August.
  18. Koetter, Michael & Kick, Thomas, 2007. "Slippery slopes of stress: ordered failure events in German banking," Discussion Paper Series 2: Banking and Financial Studies 2007,03, Deutsche Bundesbank, Research Centre.
  19. Garry J. Schinasi & R. Todd Smith, 2000. "Portfolio Diversification, Leverage, and Financial Contagion," IMF Staff Papers, Palgrave Macmillan, vol. 47(2), pages 1.
  20. Eric Santor, 2003. "Banking Crises and Contagion: Empirical Evidence," Working Papers, Bank of Canada 03-1, Bank of Canada.
  21. Harold A. Black & M. Cary Collins & Breck L. Robinson & Robert L. Schweitzer, 1997. "Changes In Market Perception Of Riskiness: The Case Of Too-Big-To-Fail," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 20(3), pages 389-406, 09.
  22. Cavallo, Laura & Rossi, Stefania P. S., 2001. "Scale and scope economies in the European banking systems," Journal of Multinational Financial Management, Elsevier, Elsevier, vol. 11(4-5), pages 515-531, December.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Bremus, Franziska & Buch, Claudia M. & Russ, Katheryn N. & Schnitzer, Monika, 2013. "Big Banks and Macroeconomic Outcomes: Theory and Cross-Country Evidence of Granularity," Munich Reprints in Economics, University of Munich, Department of Economics 20226, University of Munich, Department of Economics.
  2. Franziska Bremus & Claudia M. Buch, 2013. "Granularity in Banking and Growth: Does Financial Openness Matter?," Discussion Papers of DIW Berlin 1346, DIW Berlin, German Institute for Economic Research.
  3. Xavier Gabaix, 2009. "The Granular Origins of Aggregate Fluctuations," NBER Working Papers 15286, National Bureau of Economic Research, Inc.
  4. Buch, Claudia M. & Neugebauer, Katja, 2011. "Bank-specific shocks and the real economy," Journal of Banking & Finance, Elsevier, Elsevier, vol. 35(8), pages 2179-2187, August.
  5. 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.
  6. Francisco Vazquez & Benjamin M. Tabak & Marcos Souto, 2010. "A Macro Stress Test Model of Credit Risk for the Brazilian Banking Sector," Working Papers Series, Central Bank of Brazil, Research Department 226, Central Bank of Brazil, Research Department.
  7. del Rosal, Ignacio, 2013. "The granular hypothesis in EU country exports," Economics Letters, Elsevier, Elsevier, vol. 120(3), pages 433-436.
  8. repec:diw:diwfin:diwfin02030 is not listed on IDEAS
  9. repec:diw:diwfin:diwfin is not listed on IDEAS

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:zbw:bubdp2:200904. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (ZBW - German National Library of Economics).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.