What macroeconomic shocks affect the German banking system?: analysis in an integrated micro-macro model
In: Discussion paper
In: Ser. 2, Banking and financial studies 2009,15
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In: Discussion paper
In: Ser. 2, Banking and financial studies 2009,15
In: Discussion paper
In: Ser. 2, Banking and financial studies 2009,04
In: Journal of financial economic policy, Band 2, Heft 2, S. 126-148
ISSN: 1757-6393
PurposeThe paper is to understand how the financial system is influenced by macroeconomic shocks and how the financial stance, in turn, feeds back into the macroeconomic environment is key for policy makers. The most recent financial crisis has demonstrated the need for a deeper understanding of these interdependencies. The purpose of this paper is to analyze what macroeconomic shocks affect the soundness of the German banking system.Design/methodology/approachThe paper draws on a micro‐macro stress‐testing framework for the German banking system in which macroeconomic and bank‐specific data are used to identify the effects of various shocks in a structural vector autoregressive model, which includes main macroeconomic variables and an indicator of stress in the banking system. To this end, the sign‐restriction approach is applied.FindingsFirst, it is found that there is a close link between macroeconomic developments and the stance of the banking sector. Second, monetary policy shocks are the most influential shocks for distress in the banking sector. Third, fiscal policy shocks and real estate price shocks have a significant impact on the distress indicator, while evidence is mixed for the exchange rate. Fourth, for the identification of most shocks it is essential to work in the integrated model that combines the micro‐ and the macro‐sphere.Originality/valueThe paper analyzes various shock scenarios in an integrated micro‐macro framework that takes the mutual relationship between the financial stance and the macroeconomic environment into account.
In: Bundesbank Series 2 Discussion Paper No. 2009,15
SSRN
In: Comparative economic studies, Band 49, Heft 3, S. 389-410
ISSN: 1478-3320
In: Banco de Espana Working Paper No. 2008
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In: Bundesbank Series 2 Discussion Paper No. 2009,04
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In: Journal of international economics, Band 137, S. 103605
ISSN: 0022-1996
In: Deutsche Bundesbank Discussion Paper No. 47/2018
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In: ECB Working Paper No. 1836
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In: The World Economy, Band 42, Heft 2, S. 564-589
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In: ECB Working Paper No. 2097
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In: ECB Working Paper No. 1634
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Working paper