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Bank-specific shocks and the real economy

Buch, Claudia M. and Neugebauer, Katja (2011) Bank-specific shocks and the real economy. Journal of Banking and Finance, 35 (8). pp. 2179-2187. ISSN 0378-4266

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Identification Number: 10.1016/j.jbankfin.2011.01.023

Abstract

Governments often justify interventions into the financial system in the form of bail outs or liquidity assistance with the systemic importance of large banks for the real economy. In this paper, we analyze whether idiosyncratic shocks to loan growth at large banks have effects on real GDP growth. We employ a measure of idiosyncratic shocks which follows Gabaix (forthcoming). He shows that idiosyncratic shocks to large firms have an impact on US GDP growth. In an application to the banking sector, we find evidence that changes in lending by large banks have a significant short-run impact on GDP growth. Episodes of negative loan growth rates and the Eastern European countries in our sample drive these results.

Item Type: Article
Official URL: http://www.journals.elsevier.com/journal-of-bankin...
Additional Information: © 2014 Elsevier B.V.
Divisions: Systemic Risk Centre
Subjects: H Social Sciences > HJ Public Finance
JEL classification: G - Financial Economics > G1 - General Financial Markets > G14 - Information and Market Efficiency; Event Studies
Sets: Research centres and groups > Systemic Risk Centre
Date Deposited: 10 Jun 2014 16:32
Last Modified: 20 Mar 2019 02:01
URI: http://eprints.lse.ac.uk/id/eprint/57018

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