Should the CCYB be enhanced with a sectoral dimension? The case of Italy

Roberta Fiori (roberta.fiori@bancaditalia.it) and Claudia Pacella (claudia.pacella@bancaditalia.it)
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Roberta Fiori: Bank of Italy

No 499, Questioni di Economia e Finanza (Occasional Papers) from Bank of Italy, Economic Research and International Relations Area

Abstract: The paper investigates whether there is sufficient empirical support in Italy for the introduction of a sectoral countercyclical capital buffer (CCyB) in the macroprudential framework. We study the sectoral decomposition of the credit-to-GDP gap over the period 1990Q1-2017Q2. Overall, our results suggests that a sectoral CCyB could be a useful addition to the macroprudential framework as both the timing for activation and the size of the capital buffer can differ when accounting for the sectoral dimension of the credit-to-GDP gap. We find that the synchronicity of sectoral credit cycles decreases as we move from a two-sector to a six-sector decomposition. Moreover, the contribution of sectoral cycles to systemic stress, as measured by the system-wide new bad debt rate, as well as the prudential requirements associated with their risk exposure differ quite significantly. While exuberance in the non-real-estate related segment of corporate lending is usually followed by a surge in systemic stress, exuberance in the real-estate related segment of business lending does not.

Keywords: credit cycle; sectoral decomposition; synchronicity; cyclical systemic risk (search for similar items in EconPapers)
JEL-codes: E32 G01 G21 G28 (search for similar items in EconPapers)
Date: 2019-06
New Economics Papers: this item is included in nep-ban, nep-mac and nep-rmg
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Citations: View citations in EconPapers (1)

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