Kiel Working Papers, Kiel Institute for World Economics
No 1419:
How Resilient is the German Banking System to Macroeconomic Shocks?
Jonas Dovern, Carsten-Patrick Meier and Johannes Vilsmeier
Abstract: Macro-stress testing studies often rely on rather short
sample periods due to the limited availability of banking data. They may
fail to appropriately account for the cyclicality in the interaction
between the banking system and macroeconomic developments. In this paper we
use a newly constructed data set on German banks’ income and loss
statements over the past 36 years to model the interaction between the
banking sector and the macroeconomy. Our identified-VAR analysis indicates
that the level of stress in the banking sector is strongly affected by
monetary policy shocks. The results rationalize the active behavior of
central banks observed during periods of financial market crises
Keywords: stress testing, banking, VAR; (follow links to similar papers)
JEL-Codes: C32,; E44; (follow links to similar papers)
21 pages, April 2008
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