Federal Reserve Bank of Cleveland
Working Papers (New Series)
How Cyclical Is Bank Capital?
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 (counter-cyclical leverage).
Cite this item
Joseph G. Haubrich, How Cyclical Is Bank Capital?, Federal Reserve Bank of Cleveland, Working Papers (New Series) 150401, 15 Mar 2015, revised 09 Feb 2018.
Note: This is a revision of Working Paper 15-04 originally published in March of 2015.
- E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
- G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
- G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
- N20 - Economic History - - Financial Markets and Institutions - - - General, International, or Comparative
Keywords: Bank capital; business cycles
This item with handle RePEc:fip:fedcwq:150401
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