Sleibi, Yacoub and Casalin, Fabrizio and Fazio, Giorgio (2020) 'Bank-specific shocks and aggregate leverage: Empirical evidence from a panel of developed countries.' Journal of Financial Stability, 49. p. 100743. ISSN 1572-3089

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Abstract

This paper investigates the link between shocks in the banking sector and aggregate leverage measured by the credit-to-GDP gap. Using a balanced panel of 15 countries for the period 1989–2016, we exploit the approach due to Gabaix (2011) and consider banking granular shocks as an indicator of banking distress. Using methods that account for potential endogeneity, we find that banking shocks Granger-cause aggregate leverage. In particular, banking shocks tend to increase the level of leverage and cause departures of the credit-to-GDP ratio from its long-term trend.

Item Type:	Article
Uncontrolled Keywords:	Banking shocks; Granularity model; Credit-to-GDP gap; Panel VAR; Granger causality
Divisions:	Faculty of Social Sciences Faculty of Social Sciences > Economics, Department of
SWORD Depositor:	Elements
Depositing User:	Elements
Date Deposited:	08 Jan 2021 11:11
Last Modified:	18 Aug 2022 12:29
URI:	http://repository.essex.ac.uk/id/eprint/29475

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