Banks’ riskiness over the business cycle: a panel analysis on Italian intermediaries
Year: 2006
Type: article
Abstract: A comprehensive investigation is provided on the issue of the possible cyclical nature of banks’ behaviour using a large panel of Italian intermediaries over the period 1985 to 2002. Estimating both static and dynamic models, the article investigates whether loan loss provisions and non-performing loans show a cyclical pattern. The econometric results confirm that business cycle affects banks’ loan loss provisions and new bad debts. The impact of recessionary conditions is significant and long-lasting. Moreover, the empirical evidence provides some support for the income-smoothing hypothesis. The estimated relations may be employed to carry out stress tests to assess the effects of macroeconomic shocks on banks' balance sheets.
Source: Applied Financial Economics
Author: Mario Quagliariello
Institution: Bank of Italy
Language: English
Subfield: Finance
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W3124356832