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What simple econometric analysis will tell us about the relationship between macroeconomic variables, stock market indices, and the activity of the banking sector?

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  • Anna Gomola

    (Uniwersytet Ekonomiczny w Krakowie, Katedra Empirycznych Analiz Stabilności Gospodarczej)

Abstract

The main goal of macroprudential policy is to reduce the systematic risk and the macroeconomic costs of financial instabilities. After the financial crisis of 2008, the macroprudential framework has been developed. In the paper we test the role of the banking sector’s activity in the strength of the causal relationships between the real sector and the financial system. One of the main goals of macroprudential framework is to reduce the credit supply and strengthen the financial system. We examine the strength of the relationship between several macroeconomic variables, such as industrial production, the interest rate, stock market values, the unemployment rate, and particularly the volume of credit to the non-financial sector. The empirical analyses are performed with reference to three economies: Poland, Germany, and the United Kingdom. Substantial diversity of sources of economic growth as well as the size of the financial system in the case of the countries in question allows for a better understanding of the connections between the financial sector and the real sector. Moreover, each of them experienced the 2008 crisis in a different way.

Suggested Citation

  • Anna Gomola, 2022. "What simple econometric analysis will tell us about the relationship between macroeconomic variables, stock market indices, and the activity of the banking sector?," Bank i Kredyt, Narodowy Bank Polski, vol. 53(1), pages 1-46.
    • Handle: RePEc:nbp:nbpbik:v:53:y:2022:i:1:p:1-46
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    VAR; IRF; Granger causality; business cycle; credit cycle;
    All these keywords.

    JEL classification:

    • B23 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Econometrics; Quantitative and Mathematical Studies
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • G01 - Financial Economics - - General - - - Financial Crises

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