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Modelling the demand and supply of loans in Bulgaria

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  • Petar Peshev

Abstract

Econometric modelling of demand and supply of bank loans in Bulgaria, introducedin this scientific paper, can help not only decision makers in the public and privatesector, but can also support researchers and analysts in revealing the determinantsof lending, being a major factor for the economy dynamics. The bank loans’demand and supply determinants are parameterized using the Johansen (1988)and the two-step Engle and Granger (1987) approaches to cointegration and errorcorrection dynamic modelling. The main results reveal that the demand for loans inthe long run depends mainly on the economic activity, capital inflows, deposits andloans to deposits ratio of the non-financial sector. In the short term thesedeterminants are complemented by imports of goods and services. The supply ofloans, however, in all time frames is influenced primarily by changes in banks’liquidity, net interest income, capital adequacy and the producer prices dynamics,but in the long term consumer prices, market concentration and foreign ownershipare supplementing the supply of loans’ drivers.

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  • Petar Peshev, 2015. "Modelling the demand and supply of loans in Bulgaria," Economic Thought journal, Bulgarian Academy of Sciences - Economic Research Institute, issue 5, pages 52-69,70-85.
    • Handle: RePEc:bas:econth:y:2015:i:5:p:52-69,70-85
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    8. Bernanke, Ben S & Blinder, Alan S, 1988. "Credit, Money, and Aggregate Demand," American Economic Review, American Economic Association, vol. 78(2), pages 435-439, May.
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    10. Balázs Égert & Peter Backé & Tina Zumer, 2007. "Private-Sector Credit in Central and Eastern Europe: New (Over)Shooting Stars?," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 49(2), pages 201-231, June.
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    Cited by:

    1. Petar Peshev & Ivaylo Beev, 2016. "Negative Nominal Interest Rates on Loans: The Newly-Established Normal Practice?," Economic Alternatives, University of National and World Economy, Sofia, Bulgaria, issue 2, pages 149-158, June.

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    More about this item

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • E47 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Forecasting and Simulation: Models and Applications
    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
    • G01 - Financial Economics - - General - - - Financial Crises

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