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Macroeconomic Fluctuations and Bank Lending: Evidence for Germany and the Euro Area

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  • Sandra Eickmeier
  • Boris Hofmann
  • Andreas Worms

Abstract

This paper analyzes the dynamic response of loans to the private sector and of economic activity to aggregate supply, demand and monetary policy shocks in Germany and the euro area based on a standard macroeconomic VAR using sign restrictions to identify the structural shocks. The main results of this analysis are that (i) with the exception of the response to the supply shock in Germany, the response of loans to the three macroeconomic shocks is rather weak and in most cases insignificant; (ii) the 2000-05 credit slowdown and weak economic performance in Germany were primarily driven by adverse supply shocks; and (iii) the marked slowdown in credit creation in Germany over this period actually represents a realignment of the outstanding stock of loans with its deterministic level. In order to assess the role of bank lending in the transmission of macroeconomic shocks, we further perform counterfactual simulations and analyze the dynamic responses of German loan subaggregates in order to test the distributional implications of potential credit market frictions. These exercises do not indicate that credit market frictions play an amplifying role in the transmission of macroeconomic fluctuations. Copyright 2009 The Authors. Journal Compilation 2009 Verein für Socialpolitik and Blackwell Publishing Ltd. 2009.

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Bibliographic Info

Article provided by Verein für Socialpolitik in its journal German Economic Review.

Volume (Year): 10 (2009)
Issue (Month): (05)
Pages: 193-223

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Handle: RePEc:bla:germec:v:10:y:2009:i::p:193-223

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  1. > Econometrics > Time Series Models > VAR Models > Sign Restrictions
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Cited by:
  1. Ren�e Fry & Adrian Pagan, 2011. "Sign Restrictions in Structural Vector Autoregressions: A Critical Review," Journal of Economic Literature, American Economic Association, vol. 49(4), pages 938-60, December.
  2. Adam Gersl & Petr Jakubik, 2010. "Procyclicality of the Financial System and Simulation of the Feedback Effect," Occasional Publications - Chapters in Edited Volumes, in: CNB Financial Stability Report 2009/2010, chapter 0, pages 110-119 Czech National Bank, Research Department.
  3. Wollmershäuser, Timo & Hristov, Nikolay & Hülsewig, Oliver, 2013. "The Interest Rate Pass-Through in the Euro Area During the Global Financial Crisis," Munich Reprints in Economics 19715, University of Munich, Department of Economics.
  4. Matthias Balz, 2008. "Branchen im Blickpunkt: Die ökologische Lebensmittelwirtschaft," Ifo Schnelldienst, Ifo Institute for Economic Research at the University of Munich, vol. 61(09), pages 23-28, 05.
  5. Hristov, Nikolay & Hülsewig, Oliver & Wollmershäuser, Timo, 2012. "Loan supply shocks during the financial crisis: Evidence for the Euro area," Munich Reprints in Economics 19367, University of Munich, Department of Economics.
  6. Klaus Abberger & André Kunkel, 2008. "Unternehmen leiden kaum unter Finanzierungsschwierigkeiten durch die Finanzmarktkrise," Ifo Schnelldienst, Ifo Institute for Economic Research at the University of Munich, vol. 61(09), pages 29-31, 05.
  7. Tomas Havranek & Marek Rusnak, 2012. "Transmission Lags of Monetary Policy: A Meta-Analysis," Working Papers IES 2012/27, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, revised Oct 2012.
  8. De Graeve, F. & Kick, T. & Koetter, M., 2008. "Monetary policy and financial (in)stability: An integrated micro-macro approach," Journal of Financial Stability, Elsevier, vol. 4(3), pages 205-231, September.
  9. Johann Burgstaller, 2010. "Bank Lending and Monetary Policy Transmission in Austria," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), Justus-Liebig University Giessen, Department of Statistics and Economics, vol. 230(2), pages 163-185.
  10. Jonas Dovern & Carsten-Patrick Meier & Johannes Vilsmeier, 2008. "How Resilient is the German Banking System to Macroeconomic Shocks?," Kiel Working Papers 1419, Kiel Institute for the World Economy.
  11. Ricardo Bebczuk & Tamara Burdisso & Jorge Carrera & Máximo Sangiácomo, 2011. "A New Look into Credit Procyclicality: International Panel Evidence," BCRA Working Paper Series 201155, Central Bank of Argentina, Economic Research Department.

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