Is Bank Portfolio Riskiness Procyclical? Evidence from Italy using a Vector Autoregression

Juri Marcucci and Mario Quagliariello

Discussion Papers from Department of Economics, University of York

Abstract: This study analyzes the cyclical behaviour of the default rates of Italian bank borrowers over the last two decades. A vector autoregression (VAR) modelling technique is employed to assess the extent to which macroeconomic shocks affect the banking sector (first round effect). The VAR also helps to disentangle the feedback effects from the financial system to the real side of the economy. We find evidence of the first round effect and some support for the feedback effect which operates via the bank capital channel.

Keywords: First-round effect; procyclicality; feedback effects; VAR; banks; default rate (search for similar items in EconPapers)
JEL-codes: C32 E30 E32 E44 G28 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-bec, nep-eec, nep-fin, nep-mac and nep-rmg
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Citations: View citations in EconPapers (64)

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Journal Article: Is bank portfolio riskiness procyclical: Evidence from Italy using a vector autoregression (2008)
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Persistent link: https://EconPapers.repec.org/RePEc:yor:yorken:05/09

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