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Other financial corporations: Cinderella or ugly sister of empirical monetary economics?

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Author Info

  • K. Alec Chrystal

    (Cass Business School, London, UK)

  • Paul Mizen

    (University of Nottingham, UK)

Abstract

This paper reports estimates of an econometric model of the determinants of OFCs' broad money holding and M4 lending to OFCs. This is of interest both as providing information about a component of UK money and credit aggregates and because it provides some evidence of the link between financial activity and growth of the real economy. We model the long-run equilibria for money holding and lending to this sector as being driven by GDP, wealth, the return to financial services and various interest spreads. The dynamics of OFCs' money and lending are shown to be interdependent. We then consider the evidence for interactions between OFCs and other sectors. Our results indicate that M4 lending to OFCs is significantly related to aggregate investment in the long run, but is largely unrelated to the spending of households. Copyright © 2005 John Wiley & Sons, Ltd.

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File URL: http://hdl.handle.net/10.1002/ijfe.258
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Bibliographic Info

Article provided by John Wiley & Sons, Ltd. in its journal International Journal of Finance & Economics.

Volume (Year): 10 (2005)
Issue (Month): 1 ()
Pages: 63-80

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Handle: RePEc:ijf:ijfiec:v:10:y:2005:i:1:p:63-80

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Web page: http://www.interscience.wiley.com/jpages/1076-9307/

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References

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  1. Hendry, D.F. & Mizon, G.E., 1990. "Evaluating Dynamic Econometric Models By Encompassing The Var," Economics Series Working Papers 99102, University of Oxford, Department of Economics.
  2. Søren Johansen & Katarina Juselius, 1992. "Identification of the Long-Run and the Short-Run Structure: An Application to the ISLM Model," Discussion Papers 92-04, University of Copenhagen. Department of Economics.
  3. Levine, Ross & Loayza, Norman & Beck, Thorsten, 2000. "Financial intermediation and growth: Causality and causes," Journal of Monetary Economics, Elsevier, vol. 46(1), pages 31-77, August.
  4. Aubhik Khan, 1999. "Financial development and economic growth," Working Papers 99-11, Federal Reserve Bank of Philadelphia.
  5. Olivier Jean Blanchard & Danny Quah, 1988. "The Dynamic Effects of Aggregate Demand and Supply Disturbance," Working papers 497, Massachusetts Institute of Technology (MIT), Department of Economics.
  6. Drake, Leigh & Chrystal, K Alec, 1997. "Personal Sector Money Demand in the UK," Oxford Economic Papers, Oxford University Press, vol. 49(2), pages 188-206, April.
  7. Bardsen, G. & Fisher, P.G., 1993. "The Importance of Being Structured," Papers 02-93, Norwegian School of Economics and Business Administration-.
  8. Panicos O. Demetriades & Philip Arestis, 1996. "Financial Development and Economic Growth: Assessing the Evidence," Keele Department of Economics Discussion Papers (1995-2001) 96/16, Department of Economics, Keele University.
  9. K Alec Chrystal & Paul Mizen, 2001. "Consumption, money and lending: a joint model for the UK household sector," Bank of England working papers 134, Bank of England.
  10. Levine, Ross, 1996. "Financial development and economic growth : views and agenda," Policy Research Working Paper Series 1678, The World Bank.
  11. Scott, Alasdair, 2003. "APPLIED MACROECONOMETRICS Carlo A. Favero Oxford University Press, 2001," Macroeconomic Dynamics, Cambridge University Press, vol. 7(02), pages 313-315, April.
  12. Barr, David G & Cuthbertson, Keith, 1991. "An Interdependent Error Feedback Model of UK Company Sector Asset Demands," Oxford Economic Papers, Oxford University Press, vol. 43(4), pages 596-611, October.
  13. Barr, D G & Cuthbertson, K, 1992. "A Data Based Simulation Model of the Financial Asset Decisions of UK, 'Other' Financial Intermediaries," Scottish Journal of Political Economy, Scottish Economic Society, vol. 39(3), pages 241-60, August.
  14. Engle, Robert F & Granger, Clive W J, 1987. "Co-integration and Error Correction: Representation, Estimation, and Testing," Econometrica, Econometric Society, vol. 55(2), pages 251-76, March.
  15. Paul Harrison & Oren Sussman & Joseph Zeira, 1999. "Finance and growth: theory and new evidence," Finance and Economics Discussion Series 1999-35, Board of Governors of the Federal Reserve System (U.S.).
  16. Granger, Clive W J, 1986. "Developments in the Study of Cointegrated Economic Variables," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 48(3), pages 213-28, August.
  17. Boswijk, H. Peter, 1995. "Efficient inference on cointegration parameters in structural error correction models," Journal of Econometrics, Elsevier, vol. 69(1), pages 133-158, September.
  18. Drake, Leigh & Chrystal, K Alec, 1994. "Company-Sector Money Demand: New Evidence on the Existence of a Stable Long-Run Relationship for the United Kingdom," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 26(3), pages 479-94, August.
  19. Ryland Thomas, 1997. "The Demand for M4: A Sectoral Analysis Part 2 The Corporate Sector," Bank of England working papers 62, Bank of England.
  20. Ryland Thomas, 1997. "The Demand for M4: A Sectoral Analysis. Part 1 - The Personal Sector," Bank of England working papers 61, Bank of England.
  21. Andrew Brigden & Paul Mizen, 1999. "Money, credit and investment in UK corporate sector," Bank of England working papers 100, Bank of England.
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Cited by:
  1. Jawadi, Fredj & Sousa, Ricardo M., 2013. "Money demand in the euro area, the US and the UK: Assessing the role of nonlinearity," Economic Modelling, Elsevier, vol. 32(C), pages 507-515.
  2. Bruggeman, Annick & Donnay, Marie, 2003. "A monthly monetary model with banking intermediation for the euro area," Working Paper Series 0264, European Central Bank.
  3. Chrystal, Alec & Mizen, Paul, 2002. "Modelling credit in the transmission mechanism of the United Kingdom," Journal of Banking & Finance, Elsevier, vol. 26(11), pages 2131-2154, November.
  4. Giuseppe Ferrero & Andrea Nobili & Patrizia Passiglia, 2007. "The sectoral distribution of money supply in the Euro area," Temi di discussione (Economic working papers) 627, Bank of Italy, Economic Research and International Relations Area.

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