Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/119487 
Year of Publication: 
2010
Series/Report no.: 
FINESS Working Paper No. D.2.3
Publisher: 
Deutsches Institut für Wirtschaftsforschung (DIW), Berlin
Abstract: 
Government interventions into the financial system in the form of bail out operations or liquidity assistance are often justified with the systemic importance of large banks for the real economy. In this paper, we test whether idiosyncratic shocks to loan growth at large banks have effects on real GDP growth. We employ a measure of idiosyncratic shocks which follows Gabaix (2009). He shows that idiosyncratic shocks at large firms have an impact on GDP growth in the US. We apply this idea to the banking sector. We find evidence that changes in lending by large banks have a significant impact on GDP growth. This effect is mostly driven by episodes of negative loan growth rates and by the Eastern European countries in our sample.
Subjects: 
Granular Residual
idiosyncratic shocks
banking sector
size effects
GDP growth
JEL: 
G21
E32
Document Type: 
Working Paper

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