Choose an application

• Reference Manager
• EndNote
• RefWorks (Direct export to RefWorks)

We analyze a range of macrofinancial indicators to extract signals about cyclical systemic risk across 107 economies over 1995–2020. We construct composite indices of underlying liquidity, solvency and mispricing risks and analyze their patterns over the financial cycle. We find that liquidity and solvency risk indicators tend to be counter-cyclical, whereas mispricing risk ones are procyclical, and they all lead the credit cycle. Our results lend support to high-level accounts that risks were underestimated by stress indicators in the run-up to the 2008 global financial crisis. The policy implications of conflicting risk signals would depend on the phase of the credit cycle.

Banks and Banking --- Finance: General --- Macroeconomics --- Financial Markets and the Macroeconomy --- Money Supply --- Credit --- Money Multipliers --- Financing Policy --- Financial Risk and Risk Management --- Capital and Ownership Structure --- Value of Firms --- Goodwill --- Business Fluctuations --- Cycles --- Bankruptcy --- Liquidation --- General Financial Markets: Government Policy and Regulation --- Finance --- Financial services law & regulation --- Credit cycles --- Liquidity risk --- Solvency --- Systemic risk --- Private debt --- Financial risk management --- Debt --- Business cycles --- Denmark --- Monetary policy. --- Fiscal policy. --- Risk management.

Choose an application

• Reference Manager
• EndNote
• RefWorks (Direct export to RefWorks)

This paper studies episodes in which aggregate bank credit contracts alongside expanding economic activity—credit reversals. Using data for 179 countries during 1960‒2017, the paper finds that reversals are a relatively common phenomenon--on average, they occur every five years. By comparison, banking crises take place every eight years on average. Credit reversals and banking crises also appear related to each other: reversals become more likely in the aftermath of banking crises, while the likelihood of crises drops following reversals. In terms of foregone economic activity, reversals are shown to be very costly, at about two-thirds of the costs of banking crises after taking into account their relative frequencies.

Macroeconomics --- Economics: General --- International Economics --- Money and Monetary Policy --- Banks and Banking --- Financial Risk Management --- Foreign Exchange --- Informal Economy --- Underground Econom --- Monetary Policy, Central Banking, and the Supply of Money and Credit: General --- Financial Crises --- Business Fluctuations --- Cycles --- Economic & financial crises & disasters --- Economics of specific sectors --- Monetary economics --- Credit --- Money --- Banking crises --- Financial crises --- Bank credit --- Credit cycles --- Financial sector policy and analysis --- Currency crises --- Informal sector --- Economics --- Business cycles

Choose an application

• Reference Manager
• EndNote
• RefWorks (Direct export to RefWorks)

Credit is key to support healthy and sustainable economic growth but excess aggregate credit growth can signal the build-up of imbalances and lead to systemic financial crisis. Hence, monitoring the credit cycle is key to identifying vulnerabilities, particularly in emerging markets, which tend to be more exposed to sudden external shocks and reversal in capital flows. We estimate the credit cycle in Central America, Panama, and the Dominican Republic and find that the creadit gap is a powerful predictor of systemic vulnerability in the region. We simulate the activation of the Basel III countercyclical capital buffers and discuss the macroprudential policy implications of the results, arguing that countercyclical macroprudential policies based on the credit gap could prove useful to enhance the resilience of the region’s financial sector but the activation of macroprudential instruments should also be informed by the development of other macrofinancial variables and by expert judgment.

Banks and Banking --- Macroeconomics --- Money and Monetary Policy --- Industries: Financial Services --- Prices, Business Fluctuations, and Cycles: General (includes Measurement and Data) --- Financial Markets and the Macroeconomy --- Monetary Policy, Central Banking, and the Supply of Money and Credit: General --- General Financial Markets: General (includes Measurement and Data) --- Financial Institutions and Services: General --- Financial Institutions and Services: Government Policy and Regulation --- Business Fluctuations --- Cycles --- Banks --- Depository Institutions --- Micro Finance Institutions --- Mortgages --- Finance --- Monetary economics --- Financial services law & regulation --- Credit cycles --- Nonperforming loans --- Credit gaps --- Credit --- Countercyclical capital buffers --- Financial sector policy and analysis --- Financial institutions --- Money --- Financial regulation and supervision --- Business cycles --- Loans --- Asset requirements --- El Salvador

Choose an application

• Reference Manager
• EndNote
• RefWorks (Direct export to RefWorks)

This simulation-based paper investigates the impact of different methods of dynamic provisioning on bank soundness and shows that this increasingly popular macroprudential tool can smooth provisioning costs over the credit cycle and lower banks’ probability of default. In addition, the paper offers an in-depth guide to implementation that addresses pertinent issues related to data requirements, calibration and safeguards as well as accounting, disclosure and tax treatment. It also discusses the interaction of dynamic provisioning with other macroprudential instruments such as countercyclical capital.

Loan loss reserves --- Banking law --- Business cycles --- Banks and banking --- Law, Banking --- Financial institutions --- Bad debt reserves --- Loan loss allowances --- Provisioning (Banking) --- Bank reserves --- Econometric models. --- Law and legislation --- Banks and Banking --- Macroeconomics --- Money and Monetary Policy --- Industries: Financial Services --- Finance: General --- Banks --- Depository Institutions --- Micro Finance Institutions --- Mortgages --- Financial Institutions and Services: Government Policy and Regulation --- Business Fluctuations --- Cycles --- Monetary Policy, Central Banking, and the Supply of Money and Credit: General --- General Financial Markets: Government Policy and Regulation --- Finance --- Banking --- Financial services law & regulation --- Monetary economics --- Loans --- Credit cycles --- Countercyclical capital buffers --- Credit --- Financial sector policy and analysis --- Financial regulation and supervision --- Money --- Basel II --- Asset requirements --- State supervision --- Spain

Choose an application

• Reference Manager
• EndNote
• RefWorks (Direct export to RefWorks)

This paper explores the nexus between the financial cycle and business cycle in Brazil. Cycles are estimated using a variety of commonly-used statistical methods and with a small, semistructural model of the Brazilian economy. An advantage of using the model-based approach is that financial and business cycles can be jointly estimated, allowing information from all key economic relationships to be used in a consistent way. The results show that Brazil is now in the downturn phase of the financial cycle. Moreover, the results underscore the importance of macro-financial linkages and highlight risks to the recovery going forward.

Brazil --- Economic conditions. --- Economic policy. --- Banks and Banking --- Macroeconomics --- Money and Monetary Policy --- Prices, Business Fluctuations, and Cycles: General (includes Measurement and Data) --- Financial Markets and the Macroeconomy --- General Financial Markets: General (includes Measurement and Data) --- Financial Institutions and Services: General --- Monetary Policy, Central Banking, and the Supply of Money and Credit: General --- Business Fluctuations --- Cycles --- Banks --- Depository Institutions --- Micro Finance Institutions --- Mortgages --- Monetary economics --- Economic growth --- Banking --- Credit --- Financial cycles --- Business cycles --- Credit cycles --- State-owned banks --- Money --- Financial sector policy and analysis --- Financial institutions --- Banks and banking