Bank Capital and Real GDP Growth

Nina Boyarchenko, Domenico Giannone and Anna Kovner

No 24-08, Working Paper from Federal Reserve Bank of Richmond

Abstract: We find evidence that bank capital matters for the distribution of future GDP growth but not its central tendency. Growth in the aggregate bank capital ratio compresses the tails of expected GDP growth, a relationship that is particularly robust in reducing the probability of the worst GDP outcomes. These results suggest a role for regulation to mitigate financial crises, with an additional 100 basis points of bank capital reducing the probability of negative GDP growth by 10 percent at the one-year horizon, even controlling for credit growth and financial conditions, and without a significant drag on expected GDP growth.

Keywords: capital ratios; growth-at-risk; quantile regressions; threshold regressions (search for similar items in EconPapers)
JEL-codes: C22 E32 G21 (search for similar items in EconPapers)
Pages: 72
Date: 2024-09
New Economics Papers: this item is included in nep-ban
References: View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.richmondfed.org/-/media/RichmondFedOrg ... ers/2024/wp24-08.pdf Working Paper (application/pdf)

Related works:
Working Paper: Bank Capital and Real GDP Growth (2020)
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:fip:fedrwp:98840

Ordering information: This working paper can be ordered from
research.publications@rich.frb.org

DOI: 10.21144/wp24-08

Access Statistics for this paper

More papers in Working Paper from Federal Reserve Bank of Richmond Contact information at EDIRC.
Bibliographic data for series maintained by Christian Pascasio (christian.pascasio@rich.frb.org).