Bank capital and real GDP growth

Arbeitspapier

We study the relationship between bank capital ratios and the distribution of future real GDP growth. Growth in the aggregate bank capital ratio corresponds to a smaller left tail of GDP - smaller crisis probability - but at the cost of a smaller right tail of growth outcomes - smaller probability of exuberant growth. This trade-off persists at horizons of up to eight quarters, highlighting the long-range consequences of changes in bank capital. We show that the predictive information in bank capital ratio growth is over and above that contained in real credit growth, suggesting importance for bank capital beyond supplying credit to the nonfinancial sector. Our results suggest that coordination between macroprudential and monetary policy is crucial for supporting stable growth.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Staff Report ; No. 950

Classification and Topics

• Classification: Wirtschaft ; Business Fluctuations; Cycles ; Banks; Depository Institutions; Micro Finance Institutions; Mortgages ; Single Equation Models; Single Variables: Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
• Subject: capital ratios ; growth-at-risk ; quantile regressions ; threshold regressions

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Boyarchenko, Nina ; Giannone, Domenico ; Kovner, Anna
• Event: Veröffentlichung
• (who): Federal Reserve Bank of New York
• (where): New York, NY
• (when): 2020

Further information

• Handle: http://hdl.handle.net/10419/241143
• Last update: 10.03.2025, 11:43 AM CET