Bank profitability and the business cycle

As your product, market, and customers change over time, so should your company's differentiating and positioning strategy.

Bank profitability and the business cycle

What are business cycles and how do they affect the economy?

Bank profitability and the business cycle

May Business cycles are the "ups and downs" in economic activity, defined in terms of periods of expansion or recession. During expansions, the economy, measured by indicators like jobs, production, and sales, is growing--in real terms, after excluding the effects of inflation.

Recessions are periods when the economy is shrinking or contracting.

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During this period, the average business cycle lasted about five years; the average expansion had a duration of a little over four years, while the average recession lasted just under one year. The chart shows the periods of expansion and recession for the Composite Coincident Indicator Index from to This index, published by The Conference Board http: The chart plots the behavior of the Composite Coincident Indicator Index from to Note that the series typically climbs during expansion periods between the trough and the peak of the business cycle and falls during recessions the shaded areas between the peak and the trough.

How does the NBER determine business cycle turning points? The NBER a private nonprofit nonpartisan research organization, determines the official dates for business cycles. The NBER website http: A recession is a significant decline in activity spread across the economy, that lasts more than a few months and is visible in industrial production, employment, real income, and wholesale-retail sales.

A recession begins just after the economy reaches a peak of activity and ends as the economy reaches its trough. Between trough and peak, the economy is in an expansion.

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Expansion is the normal state of the economy; most recessions are brief and they have been rare in recent decades. Data on these official business cycle turning points and dates are available from the NBER website at http: How do NBER recessions differ from the common description of a recession as, "a period when real gross domestic product declines for two consecutive quarters?

They use monthly economic indicators such as employment, real personal income, manufacturing sales, and industrial productionrather than quarterly real Gross Domestic Product GDP. The monthly data allow the NBER to be more precise in setting business cycle turning points; the monthly data also typically are not subject to the same magnitude of revisions as are the quarterly GDP data.

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The Business Cycle Dating Committee also examines the data to evaluate the depth of a downturn to determine whether it is sufficient to qualify as a recession. The article provides a review of the process and indicators the NBER Committee uses to evaluate potential business cycle turning points.Abstract.

An important element of the macro-prudential analysis is the study of the link between business cycle fluctuations and banking sector profitability and how this link is affected by institutional and structural characteristics.

Bank profitability and the business cycle

An important element of the macro-prudential analysis is the study of the link between business cycle fluctuations and banking sector profitability and how this link is affected by institutional and structural characteristics.

For calculating the working capital using this method, we would need 3 important things and they are the estimated cost of goods sold, operating cycle time, and desired cash levels. Many firms’ corporate social responsibility (CSR) efforts are counterproductive, for two reasons: They pit business against society, when the two are actually interdependent.

Bank profitability is sensitive to macroeconomic conditions. Neely and Wheelock, , Van den Heuvel, among others assume that business cycle fluctuations affect substantially profitability of banking institutions as well as consumption, investment and aggregate demand.

While few . Business cycles are the "ups and downs" in economic activity, defined in terms of periods of expansion or recession.

During expansions, the economy, measured by indicators like jobs, production, and sales, is growing--in real terms, after excluding the effects of inflation.

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