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Dynamic Provisioning as an Automatic Stabilizer of the Financial Instability

Author

Listed:
  • Svatopluk Kapounek

    (Faculty of Business Economics, Mendel University in Brno, Czech Republic)

  • Vlasta Kašparovská

    (Faculty of Business Economics, Mendel University in Brno, Czech Republic)

Abstract

The pro-cyclical effect of provision is generally agreed and widely discussed in the context of the current financial crisis. The new model of the dynamic provisions applied in Spain showed countercyclical effects on the credit and business cycle. We simulate development of the dynamic provisions during the financial crisis and discuss the possible consequences. We apply a panel data model of the past credit cycle to calibrate the parameters following the same approach as in the Spanish dynamic provision. Our contribution is in the application of dynamic provisions on the banking systems for the V4 countries.

Suggested Citation

  • Svatopluk Kapounek & Vlasta Kašparovská, 2016. "Dynamic Provisioning as an Automatic Stabilizer of the Financial Instability," Society and Economy, Akadémiai Kiadó, Hungary, vol. 38(3), pages 341-358, September.
    • Handle: RePEc:aka:soceco:v:38:y:2016:i:3:p:341-358
    Note: The results introduced in the paper have been funded with support from the Czech Science Foundation via grant No. P403/14-28848S “Financial Crisis, Depreciation and Credit Crunch in CEECs”.
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    More about this item

    Keywords

    countercyclical provisioning regime; credit cycle; macro-prudential policy;
    All these keywords.

    JEL classification:

    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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