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Does the banking sector structure matter for credit procyclicality?

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Author Info

  • Bouvatier, Vincent
  • López-Villavicencio, Antonia
  • Mignon, Valérie

Abstract

The aim of this paper is to investigate whether the banking sector structure matters in explaining credit procyclicality for 17 OECD countries over the 1986–2010 period. To this end, we first provide a detailed classification of the banking system structure through the use of a hierarchical clustering methodology. Relying on the estimation of panel VAR models and accounting for potential heterogeneity between countries, we then propose a measure of credit procyclicality based on the impulse-response function of credit to a shock in GDP. Our findings show that while credit significantly responds to shocks in GDP, the structure of the banking sector is not a key factor in assessing the procyclicality of credit for OECD countries.

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Bibliographic Info

Article provided by Elsevier in its journal Economic Modelling.

Volume (Year): 29 (2012)
Issue (Month): 4 ()
Pages: 1035-1044

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Handle: RePEc:eee:ecmode:v:29:y:2012:i:4:p:1035-1044

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Web page: http://www.elsevier.com/locate/inca/30411

Related research

Keywords: Credit cycle; Economic cycle; Banking sector structure; Financial stability; Panel VAR;

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Cited by:
  1. Bouvatier, Vincent & López-Villavicencio, Antonia & Mignon, Valérie, 2014. "Short-run dynamics in bank credit: Assessing nonlinearities in cyclicality," Economic Modelling, Elsevier, vol. 37(C), pages 127-136.

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