This file is part of IDEAS, which uses RePEc data


[ Papers | Articles | Software | Books | Chapters | Authors | Institutions | JEL Classification | NEP reports | Search | New papers by email | Author registration | Rankings | Volunteers | FAQ | Blog | Help! ]

Monetary policy and bank distress: an integrated micro-macro approach

Author info | Abstract | Publisher info | Download info | Related research | Statistics
Author Info
De Graeve, Ferre
Kick, Thomas

Additional information is available for the following registered author(s):

Abstract

Evidence on the interdependency between monetary policy and the state of the banking system is scarce. We suggest an integrated micro-macro approach with two core virtues. First, we measure the probability of bank distress directly at the bank level. Second, we integrate a microeconomic hazard model for bank distress and a standard macroeconomic model. The advantage of this approach is to incorporate micro information, to allow for non-linearities and to permit general feedback effects between bank distress and the real economy. We base the analysis on German bank and macro data between 1995 and 2004. Our results confirm the existence of a relationship between monetary policy and bank distress. A monetary contraction increases the mean probability of distress. This effect disappears when neglecting micro effects, underlining the crucial importance of the former. Distress responses are economically most significant for weak distress events and at times when capitalization is low.

Download Info
To download:

If you experience problems downloading a file, check if you have the proper application to view it first. Information about this may be contained in the File-Format links below. In case of further problems read the IDEAS help file. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://opus.zbw-kiel.de/volltexte/2008/7219/pdf/200803dkp_b_.pdf
File Format: application/pdf
File Function:
Download Restriction: no

Publisher Info
Paper provided by Deutsche Bundesbank, Research Centre in its series Discussion Paper Series 2: Banking and Financial Studies with number 2008,03.

Download reference. The following formats are available: HTML, plain text, BibTeX, RIS (EndNote), ReDIF
Length:
Date of creation: 2008
Date of revision:
Handle: RePEc:zbw:bubdp2:7219

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

For technical questions regarding this item, or to correct its listing, contact: (ZBW - German National Library for Economics).

Related research
Keywords: Stress testing bank distress monetary policy

Other versions of this item:

Find related papers by JEL classification:
E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Mortgages
G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

This paper has been announced in the following NEP Reports:

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.:
  1. Kolari, James & Glennon, Dennis & Shin, Hwan & Caputo, Michele, 2002. "Predicting large US commercial bank failures," Journal of Economics and Business, Elsevier, vol. 54(4), pages 361-387. [Downloadable!] (restricted)
  2. Koetter, M. & Bos, J.W.B. & Heid, F. & Kolari, J.W. & Kool, C.J.M. & Porath, D., 2007. "Accounting for distress in bank mergers," Journal of Banking & Finance, Elsevier, vol. 31(10), pages 3200-3217, October. [Downloadable!] (restricted)
    Other versions:
  3. Kick, Thomas & Koetter, Michael, 2007. "Slippery slopes of stress: Ordered failure events in German banking," Journal of Financial Stability, Elsevier, vol. 3(2), pages 132-148, July. [Downloadable!] (restricted)
    Other versions:
  4. Driffill, John & Rotondi, Zeno & Savona, Paolo & Zazzara, Cristiano, 2006. "Monetary policy and financial stability: What role for the futures market?," Journal of Financial Stability, Elsevier, vol. 2(1), pages 95-112, April. [Downloadable!] (restricted)
  5. Schumacher, Christian & Breitung, Jörg, 2006. "Real-time forecasting of GDP based on a large factor model with monthly and quarterly data," Discussion Paper Series 1: Economic Studies 2006,33, Deutsche Bundesbank, Research Centre. [Downloadable!]
  6. David C. Wheelock & Paul W. Wilson, 1995. "Why do banks disappear? The determinants of U.S. bank failures and acquisitions," Working Papers 1995-013, Federal Reserve Bank of St. Louis. [Downloadable!]
    Other versions:
  7. Oosterloo, Sander & de Haan, Jakob & Jong-A-Pin, Richard, 2007. "Financial stability reviews: A first empirical analysis," Journal of Financial Stability, Elsevier, vol. 2(4), pages 337-355, March. [Downloadable!] (restricted)
  8. Goodhart, Charles A. E. & Sunirand, Pojanart & Tsomocos, Dimitrios P., 2004. "A model to analyse financial fragility: applications," Journal of Financial Stability, Elsevier, vol. 1(1), pages 1-30, September. [Downloadable!] (restricted)
    Other versions:
  9. Arturo Estrella & Sangkyun Park & Stavros Peristiani, 2000. "Capital ratios as predictors of bank failure," Economic Policy Review, Federal Reserve Bank of New York, issue Jul, pages 33-52. [Downloadable!]
  10. Cole, Rebel A. & Gunther, Jeffery W., 1995. "Separating the likelihood and timing of bank failure," Journal of Banking & Finance, Elsevier, vol. 19(6), pages 1073-1089, September. [Downloadable!] (restricted)
    Other versions:
  11. Borio, Claudio, 2006. "Monetary and financial stability: Here to stay?," Journal of Banking & Finance, Elsevier, vol. 30(12), pages 3407-3414, December. [Downloadable!] (restricted)
  12. Charles Goodhart & Pojanart Sunirand & Dimitrios Tsomocos, 2006. "A model to analyse financial fragility," Economic Theory, Springer, vol. 27(1), pages 107-142, 01. [Downloadable!] (restricted)
    Other versions:
  13. Shumway, Tyler, 2001. "Forecasting Bankruptcy More Accurately: A Simple Hazard Model," Journal of Business, University of Chicago Press, vol. 74(1), pages 101-24, January. [Downloadable!] (restricted)
Full references

Statistics
Access and download statistics

Did you know? You can use convenient plug-ins to search directly IDEAS from your browser.

This page was last updated on 2008-10-3.

This information is provided to you by IDEAS at the Department of Economics, College of Liberal Arts and Sciences, University of Connecticut using RePEc data on a server sponsored by the Society for Economic Dynamics.