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Are bank loans important for output growth?

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  • Rondorf, Ulrike
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    Abstract

    This paper investigates whether changes in the volume of supplied bank loans have a significant effect on output growth in the euro area. After the significance of the bank lending channel is established, money demand shocks are used as an instrumental variable for loans, following Driscoll (2004). With the application of a cross-country panel estimation, the impact of a change in loan supply on output growth is tested. In contrast to the United States, there is evidence that fluctuations in loans lead to a response in output in the euro area, supporting the credit view.

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    Bibliographic Info

    Article provided by Elsevier in its journal Journal of International Financial Markets, Institutions and Money.

    Volume (Year): 22 (2012)
    Issue (Month): 1 ()
    Pages: 103-119

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    Handle: RePEc:eee:intfin:v:22:y:2012:i:1:p:103-119

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    Web page: http://www.elsevier.com/locate/intfin

    Related research

    Keywords: Bank lending channel; Monetary policy transmission; Credit view; Cross-country analysis; Euro area;

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    References

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    1. Joe Peek & Eric S. Rosengren & Geoffrey M. B. Tootell, 2000. "Identifying the macroeconomic effect of loan supply shocks," Working Papers 00-2, Federal Reserve Bank of Boston.
    2. Sala-i-Martin, X. & Mulligan, C.B., 1992. "U.S. Money Demand: Surprising Cross-Sectional Estimates," Papers 671, Yale - Economic Growth Center.
    3. Oliver Hülsewig & Peter Winker & Andreas Worms, 2004. "Bank Lending and Monetary Policy Transmission: A VECM Analysis for Germany," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), Justus-Liebig University Giessen, Department of Statistics and Economics, vol. 224(5), pages 511-529, September.
    4. Raphaëlle Bellando & Jean-Paul Pollin, 1996. "Le canal du crédit en France depuis la déréglementation financière : quelques tests exploratoires," Revue économique, Presses de Sciences-Po, vol. 0(3), pages 731-743.
    5. M. Hashem Pesaran, 2007. "A simple panel unit root test in the presence of cross-section dependence," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 22(2), pages 265-312.
    6. Jeremy C. Stein & Anil K. Kashyap, 2000. "What Do a Million Observations on Banks Say about the Transmission of Monetary Policy?," American Economic Review, American Economic Association, vol. 90(3), pages 407-428, June.
    7. Altunbas, Yener & Gambacorta, Leonardo & Marques-Ibanez, David, 2009. "Securitisation and the bank lending channel," European Economic Review, Elsevier, vol. 53(8), pages 996-1009, November.
    8. Benoît Mojon & Virginie Coudert & Fernando Barran, 1995. "Transmission de la politique monétaire et crédit bancaire. Une application à trois pays de l'OCDE," Revue économique, Presses de Sciences-Po, vol. 0(2), pages 393-413.
    9. Ben S. Bernanke & Alan S. Blinder, 1989. "The federal funds rate and the channels of monetary transmission," Working Papers 89-10, Federal Reserve Bank of Philadelphia.
    10. Angeloni, Ignazio & Ehrmann, Michael, 2003. "Monetary policy transmission in the euro area: any changes after EMU?," Working Paper Series 0240, European Central Bank.
    11. Westerlund, Joakim, 2005. "New Simple Tests for Panel Cointegration," Working Papers 2005:8, Lund University, Department of Economics.
    12. Driscoll, John C., 2004. "Does bank lending affect output? Evidence from the U.S. states," Journal of Monetary Economics, Elsevier, vol. 51(3), pages 451-471, April.
    13. Stephen J. Perez, 1998. "Causal ordering and 'The bank lending channel'," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 13(6), pages 613-626.
    14. Cappiello, Lorenzo & Kadareja, Arjan & Kok, Christoffer & Protopapa, Marco, 2010. "Do bank loans and credit standards have an effect on output? A panel approach for the euro area," Working Paper Series 1150, European Central Bank.
    15. Ali Anari & James Kolari & Seppo Pynnonen & Antti Suvanto, 2002. "Further evidence on the credit view: the case of Finland," Applied Economics, Taylor & Francis Journals, vol. 34(3), pages 267-278.
    16. Garretsen, Harry & Swank, Job, 1998. "The Transmission of Interest Rate Changes and the Role of Bank Balance Sheets: A VAR-Analysis for the Netherlands," Journal of Macroeconomics, Elsevier, vol. 20(2), pages 325-339, April.
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    Cited by:
    1. Vipul Bhatt & N. Kishor, 2013. "Bank lending channel in India: evidence from state-level analysis," Empirical Economics, Springer, vol. 45(3), pages 1307-1331, December.

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