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The real effects of banking shocks: Evidence from OECD countries

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  • Levintal, Oren

Abstract

This paper studies the impact of shocks to banks’ balance sheets on real economic activity. The sample consists of 18 OECD countries observed annually from 1979 to 2003. Using the Rajan–Zingales method, I find that industries that depend more heavily on external finance respond more strongly to bank income shocks, suggesting that banking shocks propagate to the real economy. The bank effect lasts for 2 years, but it is economically significant mainly for large shocks, which are relatively rare. Similar findings are obtained by comparing durable versus non-durable goods and by estimating aggregate bank effects.

Suggested Citation

  • Levintal, Oren, 2013. "The real effects of banking shocks: Evidence from OECD countries," Journal of International Money and Finance, Elsevier, vol. 32(C), pages 556-578.
  • Handle: RePEc:eee:jimfin:v:32:y:2013:i:c:p:556-578
    DOI: 10.1016/j.jimonfin.2012.05.028
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    Cited by:

    1. David Rappoport, 2016. "The Effect of Banks' Financial Position on Credit Growth : Evidence from OECD Countries," Finance and Economics Discussion Series 2016-101, Board of Governors of the Federal Reserve System (U.S.).
    2. Michael, Bryane & Zhao, Simon, 2016. "Bubble Economics How Big a Shock to China’s Real Estate Sector Will Throw the Country into Recession, and Why Does It Matter?," EconStor Preprints 141314, ZBW - German National Library of Economics.
    3. Carmen M. Reinhart & Kenneth S. Rogoff, 2009. "The Aftermath of Financial Crises," American Economic Review, American Economic Association, vol. 99(2), pages 466-472, May.
    4. repec:eee:ememar:v:31:y:2017:i:c:p:193-208 is not listed on IDEAS

    More about this item

    Keywords

    Bank ROA; Bank capital; Bank reserves; Business cycle; External finance; Banking crisis; Bank lending channel; Financial accelerators; Rajan–Zingales; Reverse causality;

    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
    • 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
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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