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Bank Capital Redux: Solvency, Liquidity, and Crisis

Oscar Jorda (), Björn Richter, Moritz Schularick and Alan Taylor ()

No 23287, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: What is the relationship between bank capital, the risk of a financial crisis, and its severity? This paper introduces the first comprehensive analysis of the long-run evolution of the capital structure of modern banking using newly constructed data for banks’ balance sheets in 17 countries since 1870. In addition to establishing stylized facts on the changing funding mix of banks, we study the nexus between capital structure and financial instability. We find no association between higher capital and lower risk of banking crisis. However, economies with better capitalized banking systems recover faster from financial crises as credit begins to flow back more readily.

JEL-codes: E44 G01 G21 N20 (search for similar items in EconPapers)
Date: 2017-03
New Economics Papers: this item is included in nep-ban, nep-his and nep-mac
Note: DAE EFG ME
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Published as Òscar Jordà & Björn Richter & Moritz Schularick & Alan M Taylor, 2021. "Bank Capital Redux: Solvency, Liquidity, and Crisis," The Review of Economic Studies, vol 88(1), pages 260-286.

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Journal Article: Bank Capital Redux: Solvency, Liquidity, and Crisis (2021) Downloads
Working Paper: Bank Capital Redux: Solvency, Liquidity, and Crisis (2017) Downloads
Working Paper: Bank Capital Redux: Solvency, Liquidity, and Crisis (2017) Downloads
Working Paper: Bank Capital Redux: Solvency, Liquidity, and Crisis (2017) Downloads
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