Banking Policy and Macroeconomic Stability: An Exploration
Whether and when does banking serve to stabilize the economy? The authors view the banking system as a filter through which foreign and domestic shocks feed through to the domestic economy. The filter can dampen or amplify the shocks through variou...
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| Format: | Policy Research Working Paper |
| Language: | English en_US |
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World Bank, Washington, D.C.
2013
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| Online Access: | http://documents.worldbank.org/curated/en/2002/06/1942076/banking-policy-macroeconomic-stability-exploration http://hdl.handle.net/10986/14290 |
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okr-10986-142902021-04-23T14:03:20Z Banking Policy and Macroeconomic Stability: An Exploration Caprio, Gerard, Jr. Honohan, Patrick ACCOUNTING ADVERSE CONSEQUENCES ASSET BUBBLES BALANCE SHEET BALANCE SHEETS BANK CAPITAL BANK CHARTERS BANK INSOLVENCY BANK LENDING BANK PERFORMANCE BANK REGULATION BANK RESERVES BANKING CRISES BANKING CRISIS BANKING SECTOR BANKING STABILITY BANKING SYSTEM BANKING SYSTEMS BANKING TRANSACTIONS BANKS BASLE ACCORD BONDS BOOMS BORROWING CAPITAL STANDARDS CAPITALIZATION CAR CD CENTRAL BANK CENTRAL BANKS CONSOLIDATION CORPORATE GOVERNANCE DEPOSIT INSURANCE DEPOSITS DOMESTIC CREDIT ECONOMIC CONCENTRATION ECONOMIC RESEARCH EMERGING MARKETS EXPECTED VALUES FACE VALUE FINANCIAL CRISIS FINANCIAL DEEPENING FINANCIAL FRAGILITY FINANCIAL INSTITUTIONS FINANCIAL INTERMEDIARY DEVELOPMENT FINANCIAL MARKETS FINANCIAL SECTOR FINANCIAL SECTOR DEVELOPMENT FINANCIAL SERVICES FINANCIAL SYSTEMS FOREIGN ASSETS FOREIGN BANKS GLOBALIZATION GUIDELINES INCENTIVE EFFECTS INTEREST RATE INTEREST RATES INTERNATIONAL FINANCIAL STATISTICS LENDING BEHAVIOR LIQUID ASSETS LIQUIDITY LOCAL GOVERNMENTS MACROECONOMIC PERFORMANCE MACROECONOMIC STABILITY MONETARY AUTHORITIES PORTFOLIO PRUDENTIAL SUPERVISION PUBLIC ENTERPRISES RATING AGENCIES REAL SECTOR REGULATORY POWERS RETAINED EARNINGS RISK MANAGEMENT SAVINGS SHAREHOLDERS SMALL BUSINESS TIME DEPOSITS TRADING TRANSPARENCY VALUATION VOLATILITY BANKING REGULATIONS MACROECONOMIC STABILITY BANKING SYSTEMS ECONOMIC SHOCKS CREDIT MARKETS CREDIT EFFECTIVENESS FOREIGN CAPITAL INTEREST RATES PRUDENTIAL REGULATIONS REGULATORY FRAMEWORK FOREIGN BANKS FINANCIAL SYSTEMS FINANCIAL CRISES PRIVATE SECTOR EMPOWERMENT RISK MANAGEMENT SOLVENCY ECONOMIC GROWTH FOREIGN OWNERSHIP Whether and when does banking serve to stabilize the economy? The authors view the banking system as a filter through which foreign and domestic shocks feed through to the domestic economy. The filter can dampen or amplify the shocks through various credit market channels, including credit growth, import of foreign capital, and possibly interest rates. The question is whether the prudential quality of banking, as proxied by measures of regulatory quality and openness to foreign banking, amplify or dampen these shocks. The authors find that many of the regulatory characteristics that have been found to deepen a financial system and make it more robust to crises-notably those which empower the private sector-also appear to reduce the sector's ability to provide short-term insulation to the macro-economy. It is as if prudent bankers are reluctant to absorb short-term risks that, if neglected, might cause solvency and growth problems in the longer run. Forbearance might dampen short-term volatility, but at the expense of the longer run health of the banking sector and the economy. One way to avoid this apparent tradeoff is evident: banking systems which have a higher share of foreign-owned banks, a feature already associated with financial deepening and lowered risk of crisis, also seem to score well in terms of short-term macroeconomic insulation. 2013-07-01T14:03:25Z 2013-07-01T14:03:25Z 2002-06 http://documents.worldbank.org/curated/en/2002/06/1942076/banking-policy-macroeconomic-stability-exploration http://hdl.handle.net/10986/14290 English en_US Policy Research Working Paper;No.2856 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo/ World Bank World Bank, Washington, D.C. Publications & Research :: Policy Research Working Paper Publications & Research |
| repository_type |
Digital Repository |
| institution_category |
Foreign Institution |
| institution |
Digital Repositories |
| building |
World Bank Open Knowledge Repository |
| collection |
World Bank |
| language |
English en_US |
| topic |
ACCOUNTING ADVERSE CONSEQUENCES ASSET BUBBLES BALANCE SHEET BALANCE SHEETS BANK CAPITAL BANK CHARTERS BANK INSOLVENCY BANK LENDING BANK PERFORMANCE BANK REGULATION BANK RESERVES BANKING CRISES BANKING CRISIS BANKING SECTOR BANKING STABILITY BANKING SYSTEM BANKING SYSTEMS BANKING TRANSACTIONS BANKS BASLE ACCORD BONDS BOOMS BORROWING CAPITAL STANDARDS CAPITALIZATION CAR CD CENTRAL BANK CENTRAL BANKS CONSOLIDATION CORPORATE GOVERNANCE DEPOSIT INSURANCE DEPOSITS DOMESTIC CREDIT ECONOMIC CONCENTRATION ECONOMIC RESEARCH EMERGING MARKETS EXPECTED VALUES FACE VALUE FINANCIAL CRISIS FINANCIAL DEEPENING FINANCIAL FRAGILITY FINANCIAL INSTITUTIONS FINANCIAL INTERMEDIARY DEVELOPMENT FINANCIAL MARKETS FINANCIAL SECTOR FINANCIAL SECTOR DEVELOPMENT FINANCIAL SERVICES FINANCIAL SYSTEMS FOREIGN ASSETS FOREIGN BANKS GLOBALIZATION GUIDELINES INCENTIVE EFFECTS INTEREST RATE INTEREST RATES INTERNATIONAL FINANCIAL STATISTICS LENDING BEHAVIOR LIQUID ASSETS LIQUIDITY LOCAL GOVERNMENTS MACROECONOMIC PERFORMANCE MACROECONOMIC STABILITY MONETARY AUTHORITIES PORTFOLIO PRUDENTIAL SUPERVISION PUBLIC ENTERPRISES RATING AGENCIES REAL SECTOR REGULATORY POWERS RETAINED EARNINGS RISK MANAGEMENT SAVINGS SHAREHOLDERS SMALL BUSINESS TIME DEPOSITS TRADING TRANSPARENCY VALUATION VOLATILITY BANKING REGULATIONS MACROECONOMIC STABILITY BANKING SYSTEMS ECONOMIC SHOCKS CREDIT MARKETS CREDIT EFFECTIVENESS FOREIGN CAPITAL INTEREST RATES PRUDENTIAL REGULATIONS REGULATORY FRAMEWORK FOREIGN BANKS FINANCIAL SYSTEMS FINANCIAL CRISES PRIVATE SECTOR EMPOWERMENT RISK MANAGEMENT SOLVENCY ECONOMIC GROWTH FOREIGN OWNERSHIP |
| spellingShingle |
ACCOUNTING ADVERSE CONSEQUENCES ASSET BUBBLES BALANCE SHEET BALANCE SHEETS BANK CAPITAL BANK CHARTERS BANK INSOLVENCY BANK LENDING BANK PERFORMANCE BANK REGULATION BANK RESERVES BANKING CRISES BANKING CRISIS BANKING SECTOR BANKING STABILITY BANKING SYSTEM BANKING SYSTEMS BANKING TRANSACTIONS BANKS BASLE ACCORD BONDS BOOMS BORROWING CAPITAL STANDARDS CAPITALIZATION CAR CD CENTRAL BANK CENTRAL BANKS CONSOLIDATION CORPORATE GOVERNANCE DEPOSIT INSURANCE DEPOSITS DOMESTIC CREDIT ECONOMIC CONCENTRATION ECONOMIC RESEARCH EMERGING MARKETS EXPECTED VALUES FACE VALUE FINANCIAL CRISIS FINANCIAL DEEPENING FINANCIAL FRAGILITY FINANCIAL INSTITUTIONS FINANCIAL INTERMEDIARY DEVELOPMENT FINANCIAL MARKETS FINANCIAL SECTOR FINANCIAL SECTOR DEVELOPMENT FINANCIAL SERVICES FINANCIAL SYSTEMS FOREIGN ASSETS FOREIGN BANKS GLOBALIZATION GUIDELINES INCENTIVE EFFECTS INTEREST RATE INTEREST RATES INTERNATIONAL FINANCIAL STATISTICS LENDING BEHAVIOR LIQUID ASSETS LIQUIDITY LOCAL GOVERNMENTS MACROECONOMIC PERFORMANCE MACROECONOMIC STABILITY MONETARY AUTHORITIES PORTFOLIO PRUDENTIAL SUPERVISION PUBLIC ENTERPRISES RATING AGENCIES REAL SECTOR REGULATORY POWERS RETAINED EARNINGS RISK MANAGEMENT SAVINGS SHAREHOLDERS SMALL BUSINESS TIME DEPOSITS TRADING TRANSPARENCY VALUATION VOLATILITY BANKING REGULATIONS MACROECONOMIC STABILITY BANKING SYSTEMS ECONOMIC SHOCKS CREDIT MARKETS CREDIT EFFECTIVENESS FOREIGN CAPITAL INTEREST RATES PRUDENTIAL REGULATIONS REGULATORY FRAMEWORK FOREIGN BANKS FINANCIAL SYSTEMS FINANCIAL CRISES PRIVATE SECTOR EMPOWERMENT RISK MANAGEMENT SOLVENCY ECONOMIC GROWTH FOREIGN OWNERSHIP Caprio, Gerard, Jr. Honohan, Patrick Banking Policy and Macroeconomic Stability: An Exploration |
| relation |
Policy Research Working Paper;No.2856 |
| description |
Whether and when does banking serve to
stabilize the economy? The authors view the banking system
as a filter through which foreign and domestic shocks feed
through to the domestic economy. The filter can dampen or
amplify the shocks through various credit market channels,
including credit growth, import of foreign capital, and
possibly interest rates. The question is whether the
prudential quality of banking, as proxied by measures of
regulatory quality and openness to foreign banking, amplify
or dampen these shocks. The authors find that many of the
regulatory characteristics that have been found to deepen a
financial system and make it more robust to crises-notably
those which empower the private sector-also appear to reduce
the sector's ability to provide short-term insulation
to the macro-economy. It is as if prudent bankers are
reluctant to absorb short-term risks that, if neglected,
might cause solvency and growth problems in the longer run.
Forbearance might dampen short-term volatility, but at the
expense of the longer run health of the banking sector and
the economy. One way to avoid this apparent tradeoff is
evident: banking systems which have a higher share of
foreign-owned banks, a feature already associated with
financial deepening and lowered risk of crisis, also seem to
score well in terms of short-term macroeconomic insulation. |
| format |
Publications & Research :: Policy Research Working Paper |
| author |
Caprio, Gerard, Jr. Honohan, Patrick |
| author_facet |
Caprio, Gerard, Jr. Honohan, Patrick |
| author_sort |
Caprio, Gerard, Jr. |
| title |
Banking Policy and Macroeconomic Stability: An Exploration |
| title_short |
Banking Policy and Macroeconomic Stability: An Exploration |
| title_full |
Banking Policy and Macroeconomic Stability: An Exploration |
| title_fullStr |
Banking Policy and Macroeconomic Stability: An Exploration |
| title_full_unstemmed |
Banking Policy and Macroeconomic Stability: An Exploration |
| title_sort |
banking policy and macroeconomic stability: an exploration |
| publisher |
World Bank, Washington, D.C. |
| publishDate |
2013 |
| url |
http://documents.worldbank.org/curated/en/2002/06/1942076/banking-policy-macroeconomic-stability-exploration http://hdl.handle.net/10986/14290 |
| _version_ |
1764429932010668032 |