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To SVAR or to SVEC? On the transmission of capital buffer shocks to the real economy

Author

Listed:
  • Piotr Dybka

    (EY Poland
    Warsaw School of Economics, Collegium of Economic Analyses)

  • Bartosz Olesiński

    (EY Poland)

  • Piotr Pękała

    (EY Poland)

  • Andrzej Torój

    (EY Poland
    Warsaw School of Economics, Collegium of Economic Analyses, Institute of Econometrics)

Abstract

Shocks to banks’ capital buffer can impact the real economy via a number of channels. We investigate the transmission of aggregate capital buffer shocks to loans, prices and economic activity in Poland over the period 2002−2015 using multivariate time series techniques. Impulse-response functions from both SVAR and SVEC models indicate an increase in GDP and loan levels in the aftermath of a positive capital buffer shock. Although previous literature predominantly focuses on SVAR analyses, only the SVEC-based simulation yields economically reliable long-run estimates of the impact. Our long-run relationships indicate that capital policy may have a lasting impact on the real variables, unlike monetary policy.

Suggested Citation

  • Piotr Dybka & Bartosz Olesiński & Piotr Pękała & Andrzej Torój, 2017. "To SVAR or to SVEC? On the transmission of capital buffer shocks to the real economy," Bank i Kredyt, Narodowy Bank Polski, vol. 48(2), pages 119-148.
  • Handle: RePEc:nbp:nbpbik:v:48:y:2017:i:2:p:119-148
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    References listed on IDEAS

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    More about this item

    Keywords

    bank capital buffers; shocks to capital ratio; impulse-response; SVAR; SVEC;
    All these keywords.

    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
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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