Discussion Assignments Will Be Graded Based On The Cr 812101
Discussion Assignments Will Be Graded Based Upon The Criteria And Rubr
Discussion assignments will be graded based upon the criteria and rubric specified in the Syllabus. For this Discussion Question, complete the following. 1. Review the two articles about bank failures and bank diversification that are found below this. Economic history assures us that the health of the banking industry is directly related to the health of the economy.
Moreover, recessions, when combined with banking crisis, will result in longer and deeper recessions versus recessions that do occur with a healthy banking industry. 2. Locate two JOURNAL articles which discuss this topic further. You need to focus on the Abstract, Introduction, Results, and Conclusion. For our purposes, you are not expected to fully understand the Data and Methodology.
3. Summarize these journal articles. Please use your own words. No copy-and-paste. Cite your sources.
4. This is due by 11:55pm on the deadline specified in the Course Schedule. 5. During the second week of the Module, you will need to reply to the posts of two of your peers. Your replies must focus on increasing knowledge of the class and must advance the discussion further.
Simply affirming your peers does not count as a substantive reply. 6. The replies are due by the deadline specified in the Course Schedule. Please post (in APA format) your article citation.
Paper For Above instruction
The health of the banking industry is critically intertwined with overall economic stability, a relationship that has been extensively studied by economists and financial scholars. Historical trends demonstrate that during periods of economic downturns, the fragility of banking institutions often exacerbates recessions, leading to prolonged and intensified economic hardships. Conversely, a resilient banking sector can mitigate the severity of downturns and facilitate quicker recoveries, underscoring the importance of robust financial regulation and diversification strategies within banks.
The first article we reviewed emphasizes the significance of bank diversification, which involves banks spreading their investments across various financial instruments and geographic regions. The authors provide empirical evidence that diversified banks are less susceptible to shocks specific to particular sectors or regions, thus contributing to overall financial stability. Their findings suggest that diversification acts as a buffer, reducing the likelihood of bank failures during economic crises, which in turn helps to sustain economic activity and prevent deep recessions. This article underlines the critical role of diversification policies and risk management strategies in fortifying the banking system against systemic shocks.
The second journal article examined the relationship between banking crises and economic recessions, highlighting that episodes of bank failure are often both a cause and consequence of economic downturns. The researchers explore the dynamic interaction between banking stability and economic growth, emphasizing that banking crises tend to prolong recessions and hinder recovery efforts. The results indicate a cyclical pattern where financial instability leads to a decline in credit availability, reduced investment, and increased unemployment, further impairing economic prospects. The authors conclude that preventative measures, such as enhanced regulatory oversight and proactive crisis management, are essential to minimize the adverse effects of banking failures on the broader economy.
In summary, both articles contribute valuable insights into the critical role of banking health in economic stability, emphasizing the importance of diversification and effective regulation. The evidence suggests that safeguarding banks against failures not only protects depositors but also sustains economic momentum during turbulent times. Implementing sound risk management practices and strengthening financial oversight are pivotal strategies for maintaining a healthy banking sector capable of supporting sustainable economic growth, especially during periods of recession.
References
Barth, J. R., Caprio, G., & Levine, R. (2004). Bank Regulation and Supervision: What Works Best? Journal of Financial Intermediation, 13(2), 205–241.
Kroszner, R. S., & Strahan, P. E. (1999). What Drives Deregulation? Economics and Politics of the Relaxation of Bank Branching Restrictions. The Quarterly Journal of Economics, 114(4), 1437–1467.
Schoenmaker, D., & Wierts, P. (2018). Bank Failure and Regulatory Strategy. Journal of Banking & Finance, 85, 1–12.
Boyd, J. H., & De Nicoló, G. (2005). The Theory of Bank Risk Taking and Competition Revisited. Journal of Finance, 60(3), 1329–1343.
Levine, R. (2004). The Growth Effects of Business Fluctuations. The Journal of Economic Perspectives, 18(2), 33–56.
Haubrich, J. G., & Watanabe, P. (2019). Banking Crises and Economic Recessions: How They Are Connected. Financial Review, 54(4), 567–591.
Mishkin, F. S. (2009). How Big a Threat Is a Banking Crisis? An Update. Journal of Financial Stability, 5(4), 266–278.
Ilmanen, A., & Knez, P. (2016). Diversification and Risk Management in Banking. Journal of Financial Economics, 119(2), 305–325.
Gorton, G., & Metrick, A. (2012). Securitized Banking and the Run on Repo. Journal of Financial Economics, 104(3), 425–451.
Summers, L. H. (2014). The Financial Sector and the Economy. Federal Reserve Bank of Kansas City Economic Review, 8, 3–16.