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Implications of Bank Equity Price Declines for Inflation

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  • Ina Hajdini

Abstract

This Economic Commentary examines the relationship between bank equity price index returns and inflation in advanced economies. While large declines in bank equity price indices are generally followed by declines in the ratio of bank credit to GDP, a measure of credit supply, and economic activity as measured by GDP, they have essentially no effect on inflation. These findings suggest that the collapse of several regional banks in early 2023 would not, on its own, put downward pressure on inflation.

Suggested Citation

  • Ina Hajdini, 2023. "Implications of Bank Equity Price Declines for Inflation," Economic Commentary, Federal Reserve Bank of Cleveland, vol. 2023(18), pages 1-6, November.
    • Handle: RePEc:fip:fedcec:97325
    DOI: 10.26509/frbc-ec-202318
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    References listed on IDEAS

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    1. Chevalier, Judith A & Scharfstein, David S, 1996. "Capital-Market Imperfections and Countercyclical Markups: Theory and Evidence," American Economic Review, American Economic Association, vol. 86(4), pages 703-725, September.
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