Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/241143
Authors: 
Boyarchenko, Nina
Giannone, Domenico
Kovner, Anna
Year of Publication: 
2020
Series/Report no.: 
Staff Report No. 950
Abstract: 
We study the relationship between bank capital ratios and the distribution of future real GDP growth. Growth in the aggregate bank capital ratio corresponds to a smaller left tail of GDP - smaller crisis probability - but at the cost of a smaller right tail of growth outcomes - smaller probability of exuberant growth. This trade-off persists at horizons of up to eight quarters, highlighting the long-range consequences of changes in bank capital. We show that the predictive information in bank capital ratio growth is over and above that contained in real credit growth, suggesting importance for bank capital beyond supplying credit to the nonfinancial sector. Our results suggest that coordination between macroprudential and monetary policy is crucial for supporting stable growth.
Subjects: 
capital ratios
growth-at-risk
quantile regressions
threshold regressions
JEL: 
E32
G21
C22
Document Type: 
Working Paper

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