Banking Sector Concentration, Credit Supply Shocks and Aggregate Fluctuations

Alfarano, Simone and Blanco-Arroyo, Omar (2022): Banking Sector Concentration, Credit Supply Shocks and Aggregate Fluctuations.

Abstract

This paper studies whether the raise in concentration experienced by the Spanish banking sector has lead to the increase of bank-specific credit supply shocks contribution to aggregate credit supply. We decompose aggregate credit volatility and find that (i) the Spanish banking sector is granular, (ii) the direct effect of bank-specific shocks accounts for the overwhelming majority of the variation in aggregate volatility, contrary to the manufacturing sector, and (iii) the raise in concentration translated into an increase of bank-specific shocks contribution to aggregate volatility.

• Item Type: MPRA Paper
• Language: English
• Keywords: Granular Residual, Idiosyncratic Shocks, Banking Sector, Manufacturing Sec- tor, Concentration, Aggregate Fluctuations
• Subjects: E - Macroeconomics and Monetary Economics > E4 - Money and Interest Rates > E44 - Financial Markets and the Macroeconomy; G - Financial Economics > G2 - Financial Institutions and Services > G21 - Banks ; Depository Institutions ; Micro Finance Institutions ; Mortgages

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