Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/264497 
Year of Publication: 
2022
Series/Report no.: 
ECB Working Paper No. 2672
Publisher: 
European Central Bank (ECB), Frankfurt a. M.
Abstract: 
This paper studies the long-run evolution of bank risk and its links to the macroeconomy. Using data for 17 advanced economies, we show that the riskiness of bank assets declined materially between 1870 and 2016. But even though bank assets have become safer, the losses on these assets are associated with increasingly large output gaps. Before 1945, bank asset returns had no excess predictive power for future economic activity, while after 1945 they have outperformed non-financials as a predictor of GDP. We provide evidence linking this increasing connectedness between banks and the macroeconomy to secular increases in financial and macroeconomic leverage.
Subjects: 
bank risk
leverage
banking crises
macro-financial linkages
long-run trends
JEL: 
G01
G15
G21
E44
N20
O16
Persistent Identifier of the first edition: 
ISBN: 
978-92-899-5121-0
Document Type: 
Working Paper

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