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What Does the Federal Reserve's Economic Value Model Tell Us About Interest Rate Risk at United States Community Banks? (ICPSR 1309)
Principal Investigator(s): Sierra, Gregory E., Federal Reserve Bank of St. Louis; Yeager, Timothy J., Federal Reserve Bank of St. Louis
The savings and loan crisis of the 1980s revealed the vulnerability of some depository institutions to changes in interest rates. Since that episode, United States bank supervisors have placed more emphasis on monitoring the interest rate risk of commercial banks. Economists at the Board of Governors of the Federal Reserve System developed a duration-based economic value model (EVM) designed to estimate the interest rate sensitivity of banks. The authors test whether measures derived from the Federal Reserve's EVM are correlated with the interest rate sensitivity of United States community banks. The answer to this question is important because bank supervisors rely on EVM measures for monitoring and risk-scoping bank-level interest rate sensitivity. The authors find that the Federal Reserve's EVM is indeed correlated with banks' interest rate sensitivity and conclude that supervisors can rely on this tool to help assess a bank's interest rate risk. These results are consistent with prior research that finds the average interest rate risk at banks to be modest, although the potential interaction between interest rate risk and other risk factors is not considered here.
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Sierra, Gregory E., and Timothy J. Yeager. What Does the Federal Reserve's Economic Value Model Tell Us About Interest Rate Risk at United States Community Banks?. ICPSR01309-v1. Ann Arbor, MI: Inter-university Consortium for Political and Social Research [distributor], 2005-03-15. http://doi.org/10.3886/ICPSR01309.v1
Persistent URL: http://doi.org/10.3886/ICPSR01309.v1
This study was funded by:
- Federal Reserve Bank of St. Louis
Scope of Study
Geographic Coverage: United States
Data Collection Notes:
(1) The file submitted is 0411gsp.sas, a program file. (2) These data are part of ICPSR's Publication-Related Archive and are distributed exactly as they arrived from the data depositor. ICPSR has not checked or processed this material. Users should consult the investigators if further information is desired.
Original ICPSR Release: 2005-03-15
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