Banks and Output Fluctuations

Carol Scotese ()

No 101, Working Papers from VCU School of Business, Department of Economics

Abstract: This paper presents evidence that disturbances originating in the banking sector can generate business cycles. The banking shocks are measured as innovations to the banking sectorís conversion of deposits into loans: a measure of intermediation efficiency. Positive banking efficiency shocks generate a significant positive impact on short-run output growth rates and a negative impact on a version of the spread between short and long term interest rates. The results are robust with respect to alternative calculations of the banking efficiency measure, to identification using short versus long-run restrictions and to other reasonable variations in the identification scheme.

JEL-codes: C32 E32 G21 (search for similar items in EconPapers)
Pages: 32 pages
Date: 2001-05
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Persistent link: https://EconPapers.repec.org/RePEc:vcu:wpaper:0101

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