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Was There a Credit Crunch in Namibia Between 1996-2000?

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Author Info

  • Sylvanus Ikhide

    ()
    (Bank of Namibia)

Abstract

Commercial bank credit is a useful tool for promoting economic growth especially at the early stages of development. It has been observed that between 1996 and the early part of 2000, the growth rate of real credit to the private sector declined significantly in Namibia. This period coincided with observed strong demand for commercial bank loans. There has therefore been public discourse on the possibility of a restriction in the supply of credit by commercial banks and hence the occurrence of a credit crunch in the economy since commercial bank lending capacity did not fall. This paper attempts to provide some evidence in this regard by examining the main determinants of commercial bank credit in the economy and ascertaining if credit has been demand or supply constrained. This has been done through a survey of disaggregated data in the banking industry and an estimation of a switching regression model to identify regimes of excess supply and demand. Although it is difficult to determine in the face of obvious demand factors the extent to which the credit slowdown can be attributed to credit supply factors, our results show that supply factors did play a major role.

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Bibliographic Info

Article provided by Universidad del CEMA in its journal Journal of Applied Economics.

Volume (Year): VI (2003)
Issue (Month): (November)
Pages: 269-290

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Handle: RePEc:cem:jaecon:v:6:y:2003:n:2:p:269-290

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Related research

Keywords: Africa; Namibia; credit crunch; asymmetric information; economic growth;

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References

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  1. Agenor, Pierre-Richard & Aizenman, Joshua & Hoffmaister, Alexander, 2000. "The credit crunch in East Asia : what can bank excess liquid assets tell us ?," Policy Research Working Paper Series 2483, The World Bank.
  2. Luis Catão, 1997. "Bank Credit in Argentina in the Aftermath of the Mexican Crisis," IMF Working Papers 97/32, International Monetary Fund.
  3. Steven A. Sharpe, 1995. "Bank capitalization, regulation, and the credit crunch: a critical review of the research findings," Finance and Economics Discussion Series 95-20, Board of Governors of the Federal Reserve System (U.S.).
  4. Dollar, David & Hallward-Driemeier, Mary, 2000. "Crisis, Adjustment, and Reform in Thailand's Industrial Firms," World Bank Research Observer, World Bank Group, vol. 15(1), pages 1-22, February.
  5. Bharat Trehan, 1999. "Economic activity and inflation," FRBSF Economic Letter, Federal Reserve Bank of San Francisco, issue mar12.
  6. Stiglitz, Joseph E & Weiss, Andrew, 1981. "Credit Rationing in Markets with Imperfect Information," American Economic Review, American Economic Association, vol. 71(3), pages 393-410, June.
  7. Baltensperger, Ernst, 1976. "The Borrower-Lender Relationship, Competitive Equilibrium, and the Theory of Hedonic Prices," American Economic Review, American Economic Association, vol. 66(3), pages 401-05, June.
  8. Ceyla PazarbaÅŸioÄŸlu, 1997. "A Credit Crunch? Finland in the Aftermath of the Banking Crisis," IMF Staff Papers, Palgrave Macmillan, vol. 44(3), pages 315-327, September.
  9. Xavier Freixas & Jean-Charles Rochet, 1997. "Microeconomics of Banking," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262061937, December.
  10. Mayer, Colin, 1988. "New issues in corporate finance," European Economic Review, Elsevier, vol. 32(5), pages 1167-1183, June.
  11. Donald S. Allen & Leonce Ndikumana, 1998. "Financial intermediation and economic growth in southern Africa," Working Papers 1998-004, Federal Reserve Bank of St. Louis.
  12. Beck, Thorsten & Levine, Ross, 2000. "New firm formation and industry growth - does having a market- or bank-based system matter?," Policy Research Working Paper Series 2383, The World Bank.
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Citations

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Cited by:
  1. BAUWENS, Luc & LUBRANO, Michel, 2006. "Bayesian inference in dynamic disequilibrium models: an application to the Polish credit market," CORE Discussion Papers 2006050, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  2. Khemraj, Tarron & Primus, Keyra, 2013. "Testing for the Credit Crunch in Trinidad and Tobago Using an Alternative Method," MPRA Paper 47372, University Library of Munich, Germany.
  3. Tarron Khemraj, 2007. "What does excess bank liquidity say about the loan market in Less Developed Countries?," Working Papers 60, United Nations, Department of Economics and Social Affairs.
  4. Paolo Del Giovane & Andrea Nobili & Federico Maria Signoretti, 2013. "Supply tightening or lack of demand? An analysis of credit developments during the Lehman Brothers and the sovereign debt crises," Temi di discussione (Economic working papers) 942, Bank of Italy, Economic Research and International Relations Area.
  5. Nada Oulidi & Laurence Allain, 2009. "Credit Market in Morocco," IMF Working Papers 09/53, International Monetary Fund.

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