Working Paper

How Resilient is the German Banking System to Macroeconomic Shocks?

Kiel Working Papers, 1419

Macro-stress testing studies often rely on rather short sample periods due to the limited

availability of banking data. They may fail to appropriately account for the cyclicality in the

interaction between the banking system and macroeconomic developments. In this paper we use a

newly constructed data set on German banks’ income and loss statements over the past 36 years to

model the interaction between the banking sector and the macroeconomy. Our identified-VAR

analysis indicates that the level of stress in the banking sector is strongly affected by monetary policy shocks. The results rationalize the active behavior of central banks observed during periods of financial market crises.

Authors

Jonas Dovern
Carsten-Patrick Meier
Johannes Vilsmeier

Info

Publication Date
JEL Classification
C32, E44