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Banks and Output Fluctuations

Author

Listed:
  • Carol Scotese Lehr

    (Department of Economics, VCU School of Business)

Abstract

This paper presents evidence that disturbances originating in the banking sector can generate business cycles. The banking shocks are measured as innovations to the banking sector’s conversion of deposits into loans: a measure of intermediation efficiency. Positive banking efficiency shocks generate a significant positive impact on short-run output growth rates and a negative impact on a version of the spread between short and long term interest rates. The results are robust with respect to alternative calculations of the banking efficiency measure, to identification using short versus long-run restrictions and to other reasonable variations in the identification scheme.

Suggested Citation

  • Carol Scotese Lehr, 2001. "Banks and Output Fluctuations," Working Papers 0101, VCU School of Business, Department of Economics.
  • Handle: RePEc:vcu:wpaper:0101
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    References listed on IDEAS

    as
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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
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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