The effects of the corona shock on the banking sector and the real economy

Economic Memo – June 2020 – No. 10

Authors Poeschl, Johannes
Subject Financial institutions; Financial stability; Macroprudential policy
Type Economic Memo
Year 2020
Published 26 June 2020
This economic memo isolates two channels through which the "corona shock" affects the economy: a fall in asset prices and an increase in the dispersion of future shocks to the economy. Both shocks are contractionary, but they operate through different channels. A CCyB that is reactivated early reduces the impact of an asset price shock the most. In contrast, a CCyB that is reactivated late reduces the impact of a volatility shock the most.