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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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File URL: http://www.blackwell-synergy.com/doi/abs/10.1111/j.1468-0475.2008.00455.x
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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. Renee Fry & Adrian Pagan, 2010. "Sign Restrictions in Structural Vector Autoregressions: A Critical Review," NCER Working Paper Series 57, National Centre for Econometric Research.
  2. Tomas Havranek & Marek Rusnak, 2012. "Transmission Lags of Monetary Policy: A Meta-Analysis," William Davidson Institute Working Papers Series wp1038, William Davidson Institute at the University of Michigan.
  3. 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.
  4. 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.
  5. 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.
  6. Dovern, Jonas & Meier, Carsten-Patrick & Vilsmeier, Johannes, 2010. "How resilient is the German banking system to macroeconomic shocks?," Journal of Banking & Finance, Elsevier, vol. 34(8), pages 1839-1848, August.
  7. Nikolay Hristov & Oliver Hülsewig & Timo Wollmershäuser, 2012. "The Interest Rate Pass-Through in the Euro Area During the Global Financial Crisis," CESifo Working Paper Series 3964, CESifo Group Munich.
  8. 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.
  9. 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.

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