The effect of macroeconomic shocks on Italian banks

The relationship between economic activity and the banking sector has always been one of the central themes in both the academic and practitioners debates. In this work we present a methodological tool of macro stress tests, focused on Italy. We estimate an autoregressive model (Var) to assess two effects: the effect of macroeconomic shocks on the banking sector (cyclical effect); the potential feedback effect from the banking sector to the real economy (pro-cyclical effect). We find evidence only for the first one