The real effects of banking shocks: Evidence from OECD countries

Oren Levintal

Journal of International Money and Finance, 2013, vol. 32, issue C, 556-578

Abstract: This paper studies the impact of shocks to banks’ balance sheets on real economic activity. The sample consists of 18 OECD countries observed annually from 1979 to 2003. Using the Rajan–Zingales method, I find that industries that depend more heavily on external finance respond more strongly to bank income shocks, suggesting that banking shocks propagate to the real economy. The bank effect lasts for 2 years, but it is economically significant mainly for large shocks, which are relatively rare. Similar findings are obtained by comparing durable versus non-durable goods and by estimating aggregate bank effects.

Keywords: Bank ROA; Bank capital; Bank reserves; Business cycle; External finance; Banking crisis; Bank lending channel; Financial accelerators; Rajan–Zingales; Reverse causality (search for similar items in EconPapers)
JEL-codes: C32 E32 E44 G21 (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jimfin:v:32:y:2013:i:c:p:556-578

DOI: 10.1016/j.jimonfin.2012.05.028

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