Shocks at large banks and banking sector distress: The Banking Granular Residual
Sven Blank (),
Claudia Buch and
Katja Neugebauer
Journal of Financial Stability, 2009, vol. 5, issue 4, 353-373
Abstract:
Size matters in banking. In this paper, we explore whether shocks originating at large banks affect the probability of distress of smaller banks and thus the stability of the banking system. Our analysis proceeds in two steps. In a first step, we follow Gabaix [Gabaix, X., 2008a. The Granular Origins of Aggregate Fluctuations. Available at SSRN: http://ssrn.com/abstract=1111765] and construct a measure of idiosyncratic shocks at large banks, the so-called Banking Granular Residual. This measure documents the importance of size effects for the German banking system. In a second step, we incorporate this measure of idiosyncratic shocks at large banks into an integrated stress-testing model for the German banking system following De Graeve et al. (2008). We find that positive shocks at large banks reduce the probability of distress of small banks.
Keywords: Banking; distress; Size; effects; Shock; propagation; Granular; Residual (search for similar items in EconPapers)
Date: 2009
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (38)
Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S1572-3089(09)00002-3
Full text for ScienceDirect subscribers only
Related works:
Working Paper: Shocks at large banks and banking sector distress: the Banking Granular Residual (2009) 
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
HTML/Text
Persistent link: https://EconPapers.repec.org/RePEc:eee:finsta:v:5:y:2009:i:4:p:353-373
Access Statistics for this article
Journal of Financial Stability is currently edited by I. Hasan, W. C. Hunter and G. G. Kaufman
More articles in Journal of Financial Stability from Elsevier
Bibliographic data for series maintained by Catherine Liu ().