Publication

This publication investigates the impact of macroeconomic shocks on the soundness of the German banking sector through the Var approach. Analysis of the interaction between the sector and the macro economy is based on the augmented version of the standard monetary Var model. The model is comprised of three variables: real GDP, consumer prices and the 3-month interest rate. The authors conclude that the methodology to identify structural shocks is robust and that the banking sector is more susceptible to policies than demand or supply shocks.