How Cyclical is Bank Capital?

40 Pages Posted: 16 Feb 2018

Multiple version iconThere are 2 versions of this paper

Date Written: February 9, 2018

Abstract

Using annual data since 1834 and quarterly data since 1959, I find a negative correlation between output and current and lagged values of the bank capital ratio, but a positive correlation with leading values, although except for the period since 1996 the numbers are mostly small and usually insignificant. The most significant correlations tend to reflect movements in bank assets, rather than capital itself, and although the pattern of aggregate correlations matches those of large banks, small banks show a different pattern, with strongly pro-cyclical capital ratios (countercyclical leverage).

Keywords: bank capital, business cycles

JEL Classification: G21, E32, G28, N20

Suggested Citation

Haubrich, Joseph G., How Cyclical is Bank Capital? (February 9, 2018). FRB of Cleveland Working Paper No. 1504R, Available at SSRN: https://ssrn.com/abstract=3124452.

Joseph G. Haubrich (Contact Author)

Federal Reserve Bank of Cleveland ( email )

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