 Bank capital requirement shocks: A narrative perspectiveAntonio Conti (), Andrea Nobili and Federico Signoretti European Economic Review, 2023, vol. 151, issue C Abstract: We provide new estimates of the impact of shocks to bank capital requirements on lending supply and macroeconomic activity based on a Bayesian VAR estimated on Italian data and identified combining sign and narrative restrictions. Narrative restrictions are based on the EBA 2011 Stress Test (ST) and the ECB 2014 Comprehensive Assessment (CA) and are corroborated by evidence from the Euro Area Bank Lending Survey. IRFs show that shocks to required capital persistently reduce R.W.A. and loan supply and lead to a temporary decline in GDP. Based on historical decomposition, the ST and the CA increased banks’ Tier 1 ratio by 40 bps and determined a contraction in loan supply and GDP after two years of up to 1.5% and 0.5%, respectively. Results are robust to using alternative narrative restrictions and hold also when controlling for market pressure during the sovereign debt crisis and for global shocks to bank capitalization. Keywords: Bank capital requirements; Banking supervision; Bayesian VAR models; Narrative restrictions (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:eecrev:v:151:y:2023:i:c:s0014292122001507 DOI: 10.1016/j.euroecorev.2022.104254 Access Statistics for this article European Economic Review is currently edited by T.S. Eicher, A. Imrohoroglu, E. Leeper, J. Oechssler and M. Pesendorfer More articles in European Economic Review from Elsevier |
Is your work missing from RePEc? Here is how to contribute.
Questions or problems? Check the EconPapers FAQ or send mail to .
EconPapers is hosted by the
School of Business at Örebro University.