The Business Cycle and Bank Failures

2018 ◽  
Vol 9 (1) ◽  
pp. 5
Author(s):  
Halil Dincer KAYA
Keyword(s):  
Business Cycle ◽  
Bank Failures ◽  
Significant Period ◽  
The Us ◽  
Before And After ◽  
The Business Cycle ◽  
Recessionary Periods

In this study, we examine the relation between the business cycle and bank failures in the US. We first look at the frequency of bank failures across expansionary and recessionary periods. Then, we examine the treatment of the failed banks by the FDIC across expansionary and recessionary periods. Finally, we compare the failed banks’ characteristics like total deposits, total assets, and estimated losses across expansionary and recessionary periods. Our results show that the 2001 recession was not a significant period in terms of bank failures. In fact, in terms of failures, the 2001 recession was not worse than the expansionary periods that come before and after it. However, our findings indicate that the 2008 recession has been much more severe compared to the 2001 recession and the expansionary periods. Also, the failed banks during the 2008 recession have been much larger firms with significantly higher loss figures when compared to the banks that failed during the 2001 recession and the expansionary periods. Our results also show that the banks that failed during the 2001 recession had similar characteristics to the banks that failed during the expansionary periods.

scholarly journals Recent trends in employees’ earnings inequality in Portugal: A quantitative analysis between 1986 and 2017

2020 ◽  
Vol 67 (3) ◽  
pp. 333-360
Author(s):  
Marta Simões ◽  
Adelaide Duarte ◽  
João Andrade
Keyword(s):  
Business Cycle ◽  
Earnings Inequality ◽  
Positive Trend ◽  
Distributed Lag ◽  
Autoregressive Distributed Lag ◽  
Before And After ◽  
Recent Trends ◽  
The Business Cycle ◽  
Using Data ◽  
Negative Growth

This paper examines employees? earnings inequality in Portugal for 1986-2017 using data from the Personnel Records database. Our objective is twofold: (a) characterize earnings inequality by comparing representative distributions, before and after the great crisis; and (b) investigate the role played by the business cycle on the behaviour of earnings inequality by estimating Autoregressive Distributed Lag (ADL) models. To identify trends and variations along the trend in earnings inequality we use cardinal measures and the coefficient of variation. We inspect the characteristics of earnings distributions in terms of moments (mean and median) and polarization (using relative distributions analysis). The main findings are: (1) earnings inequality shows a positive trend (except during the great crisis); (2) polarization is present in every year, with lower polarisation prevailing over upper polarization, both evolving at different paces (very fast 1989-2002; slower pace 2002-2008; negative growth 2008-2017); (3) the business cycle relationship with earnings inequality is negative.

scholarly journals The Prediction of Business Cycle Phases: Financial Variables and International Linkages

2002 ◽  
Vol 182 ◽  
pp. 96-105 ◽  
Author(s):  
Denise R. Osborn ◽  
Marianne Sensier
Keyword(s):  
Stock Market ◽  
Business Cycle ◽  
European Countries ◽  
Financial Variables ◽  
The Third ◽  
The Us ◽  
International Linkages ◽  
The Business Cycle ◽  
The Uk

This paper discusses recent research at the Centre for Growth and Business Cycle Research on the prediction of the expansion and recession phases of the business cycle for the UK, US, Germany, France and Italy. Financial variables are important predictors in these models, with the stock market playing a key role in the US but not the European countries, including the UK. In contrast, international linkages are important for the European countries. Our models suggest that the US and German economies have now emerged from the recession of 2001, and that all five countries will be in expansion during the third quarter of this year.

The financial accelerator and marketable debt: the prolongation channel

2018 ◽  
Vol 20 (1) ◽  
Author(s):  
Michael Kühl
Keyword(s):  
Business Cycle ◽  
Market Price ◽  
Market Value ◽  
Financial Accelerator ◽  
Factor Productivity ◽  
Net Worth ◽  
The Us ◽  
Monetary Policy Shock ◽  
The Business Cycle ◽  
Accounting Principle

Abstract This paper investigates the effects of mark-to-market accounting for risky liabilities on the business cycle. While marking assets to market results in an amplification of the business cycle, as is well-known from the financial accelerator model à la Bernanke, Gertler, and Gilchrist [Bernanke, B. S., M. Gertler, and S. Gilchrist. 1999. “The Financial Accelerator in a Quantitative Business Cycle Framework.” In Handbook of Macroeconomics, edited by J. Taylor and M. Woodford, Elsevier.], allowing for debt with a specific maturity priced at market value generates ambiguous effects. Changes in the market price of debt affects firms’ net worth since the accounting principle takes the perspective of repurchasing debt. This is called the prolongation channel of debt. Real economic activity is attenuated as long as asset and debt prices move in the same direction, whereas the response of debt prices is stronger. This happens for a monetary policy shock or a shock to total factor productivity. Amplification occurs if both prices move in opposite directions, as is the case for a demand shock. The implications for the business cycle eventually depend on the occurrence of shocks. Implementing mark-to-market accounting for liabilities in a model for the US yields a higher volatility of the business cycle.

scholarly journals The decline in volatility in the US economy. A historical perspective

2019 ◽  
Vol 72 (1) ◽  
pp. 101-123
Author(s):  
María Dolores Gadea ◽  
Ana Gómez-Loscos ◽  
Gabriel Pérez-Quirós
Keyword(s):  
World War Ii ◽  
Business Cycle ◽  
Structural Breaks ◽  
Great Moderation ◽  
World War ◽  
Long Period ◽  
Us Economy ◽  
The Us ◽  
The Business Cycle

Abstract In this paper, we analyse the volatility of US GDP growth using quarterly series starting in 1875. We find structural breaks in volatility at the end of World War II and at the beginning of the Great Moderation period. We show that the Great Moderation volatility reduction is only linked to changes in expansions, whereas that after World War II is due to changes in both expansions and recessions. We also propose several methodologies to date the US business cycle in this long period. We find that taking volatility into account improves the characterization of the business cycle.

scholarly journals Financial inclusion and business cycles

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Peterson K. Ozili
Keyword(s):  
Business Cycles ◽  
Business Cycle ◽  
Adult Population ◽  
Financial Inclusion ◽  
Current Debate ◽  
Poor People ◽  
Content Type ◽  
Financial Exclusion ◽  
The Business Cycle ◽  
Recessionary Periods

Purpose This study aims to investigate the relationship between financial inclusion and the business cycle. Design/methodology/approach Regression methodology is used to analyze the association between financial inclusion and the business cycle. Findings Using regression estimation, the findings reveal that the level of savings and the number of active formal account ownership are pro-cyclical with fluctuations in the business cycle. Also, savings by adults particularly for women and poor people declines during recessionary periods while the number of active formal account ownership declines for the adult population especially for women during recessionary periods. The findings also reveal that not all indicators of financial inclusion are pro-cyclical with fluctuating business cycles. Practical implications The implication of this observed pro-cyclical effect is that individuals and households will exit the formal financial sector during a recession, as banks become unwilling to lend money to individuals and households during bad times and this will lead to financial exclusion and vice versa. Policymakers seeking to increase the level of financial inclusion in their countries should focus on the timing of financial inclusion policies along the business cycle as the findings suggest that it might be more difficult to achieve financial inclusion objectives during recessions or periods of economic downturns. Originality/value The current debate on financial inclusion pays little attention to whether financial inclusion is pro-cyclical with the fluctuating business cycle. This study explores the association between financial inclusion and the business cycle.

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