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Is bank portfolio riskiness procyclical: Evidence from Italy using a vector autoregression

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  • Marcucci, Juri
  • Quagliariello, Mario

Abstract

This study analyzes the cyclical behaviour of the default rates of Italian bank borrowers over the last two decades. A vector autoregression (VAR) modelling technique is employed to assess the extent to which macroeconomic shocks affect the banking sector (first round effect). The VAR also helps to disentangle the feedback effects from the financial system to the real side of the economy. We find evidence of the first round effect and some support for the feedback effect which operates via the bank capital channel.
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  • Marcucci, Juri & Quagliariello, Mario, 2008. "Is bank portfolio riskiness procyclical: Evidence from Italy using a vector autoregression," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 18(1), pages 46-63, February.
    • Handle: RePEc:eee:intfin:v:18:y:2008:i:1:p:46-63
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    More about this item

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • E30 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - General (includes Measurement and Data)
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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