Economic Activity and Financial Institutional Risk: an empirical analysis for the Brazilian banking industry

Helder de Mendonça (), Délio Galvão and Renato Loures

No 243, Working Papers Series from Central Bank of Brazil, Research Department

Abstract: This paper analyzes the impact of the changes in capital requirements on bank’s risk and the trade-off between economic activity and the risk of financial institutions in the Brazilian economy. Hence, an analysis based on dynamic panel data taking into account 73 banks and a vector autoregression analysis for the period from 2001 to 2008 is made. The findings underscore that banks which adopt riskier strategies reach higher profitability. Moreover, the results suggest that the banking regulation is an important instrument for reaching the balance between the economic growth and the low exposition to the risk of banking firms in markets such as the Brazilian one.

Date: 2011-05
New Economics Papers: this item is included in nep-ban and nep-rmg
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Citations: View citations in EconPapers (5)

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