EconPapers    
Economics at your fingertips  
 

The Impact of Banking Sector Stability on the Real Economy

Pierre Monnin and Terhi Jokipii

No 2010-05, Working Papers from Swiss National Bank

Abstract: This article studies the relationship between the degree of banking sector stability and the subsequent evolution of real output growth and inflation. Adopting a panel VAR methodology for a sample of 18 OECD countries, we find a positive link between banking sector stability and real output growth. This finding is predominantly driven by periods of instability rather than by very stable periods. In addition, we show that an unstable banking sector increases uncertainty about future output growth. No clear link between banking sector stability and inflation seems to exist. We then argue that the link between banking stability and real output growth can be used to improve output growth forecasts. Using Fed forecast errors, we show that banking sector stability (instability) results in a significant underestimation (overestimation) of GDP growth in the subsequent quarters.

Keywords: Banking sector stability; real output growth; output growth forecasts (search for similar items in EconPapers)
JEL-codes: E20 E44 G21 (search for similar items in EconPapers)
Date: 2010
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9) Track citations by RSS feed

Downloads: (external link)
https://www.snb.ch/n/mmr/reference/working_paper_2 ... _paper_2010_05.n.pdf (application/pdf)

Related works:
Journal Article: The impact of banking sector stability on the real economy (2013) Downloads
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:snb:snbwpa:2010-05

Access Statistics for this paper

More papers in Working Papers from Swiss National Bank Contact information at EDIRC.
Bibliographic data for series maintained by Enzo Rossi ().

 
Page updated 2019-10-02
Handle: RePEc:snb:snbwpa:2010-05