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How do changes in monetary policy affect bank lending? An analysis of Austrian bank data

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Author Info
Sylvia Kaufmann (Oesterreichische Nationalbank, Economic Studies Division, P.O. Box 61, A-1010 Vienna, Austria)
Sylvia Frühwirth-Schnatter (Johannes Kepler Universität Linz, Department of Applied Statistics and Econometrics, Altenberger Strasse 69, A-4040 Linz, Austria)

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Abstract

Using a panel of Austrian bank data we show that the lending decisions of the smallest banks are more sensitive to interest rate changes, and that for all banks, sensitivity changes over time. We propose to estimate the groups of banks that display similar lending reactions by means of a group indicator which, after estimation, indicates each bank's classification. Additionally, we estimate a state indicator that indicates the periods during which the lending reaction differs from what we normally observe. Bayesian methods are used for estimation; a sensitivity analysis and a forecast evaluation confirm our model choice. Copyright © 2006 John Wiley & Sons, Ltd.

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File URL: http://hdl.handle.net/10.1002/jae.830
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File URL: http://qed.econ.queensu.ca:80/jae/2006-v21.3/
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Publisher Info
Article provided by John Wiley & Sons, Ltd. in its journal Journal of Applied Econometrics.

Volume (Year): 21 (2006)
Issue (Month): 3 ()
Pages: 275-305
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Handle: RePEc:jae:japmet:v:21:y:2006:i:3:p:275-305

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

  1. Albert, James H & Chib, Siddhartha, 1993. "Bayes Inference via Gibbs Sampling of Autoregressive Time Series Subject to Markov Mean and Variance Shifts," Journal of Business & Economic Statistics, American Statistical Association, vol. 11(1), pages 1-15, January.
  2. Bernanke, Ben S, 1983. "Nonmonetary Effects of the Financial Crisis in Propagation of the Great Depression," American Economic Review, American Economic Association, vol. 73(3), pages 257-76, June. [Downloadable!] (restricted)
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  3. Kiyotaki, Nobuhiro & Moore, John, 1997. "Credit Cycles," Journal of Political Economy, University of Chicago Press, vol. 105(2), pages 211-48, April.
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  4. Favero, Carlo A & Flabbi, Luca & Giavazzi, Francesco, 1999. "The Transmission Mechanism of Monetary Policy in Europe: Evidence from Banks' Balance Sheets," CEPR Discussion Papers 2303, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  5. Asea, Patrick K. & Blomberg, Brock, 1998. "Lending cycles," Journal of Econometrics, Elsevier, vol. 83(1-2), pages 89-128. [Downloadable!] (restricted)
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  6. Frühwirth-Schnatter, Sylvia & Kaufmann, Sylvia, 2004. "Model-based Clustering of Multiple Time Series," CEPR Discussion Papers 4650, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  7. Chib, Siddhartha, 1996. "Calculating posterior distributions and modal estimates in Markov mixture models," Journal of Econometrics, Elsevier, vol. 75(1), pages 79-97, November. [Downloadable!] (restricted)
  8. Hamilton, James D., 1990. "Analysis of time series subject to changes in regime," Journal of Econometrics, Elsevier, vol. 45(1-2), pages 39-70. [Downloadable!] (restricted)
  9. Bernanke, Ben S & Blinder, Alan S, 1992. "The Federal Funds Rate and the Channels of Monetary Transmission," American Economic Review, American Economic Association, vol. 82(4), pages 901-21, September. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Sylvia Kaufmann & Maria Teresa Valderrama, 2004. "Modeling Credit Aggregates," Working Papers 90, Oesterreichische Nationalbank (Austrian Central Bank). [Downloadable!]
  2. Sylvia Kaufmann, 2008. "Dating and forecasting turning points by Bayesian clustering with dynamic structure: A suggestion with an application to Austrian data," Working Papers 144, Oesterreichische Nationalbank (Austrian Central Bank). [Downloadable!]
  3. Merkl, Christian & Stolz, Stéphanie, 2006. "Banks' regulatory buffers, liquidity networks and monetary policy transmission," Discussion Paper Series 2: Banking and Financial Studies 2006,06, Deutsche Bundesbank, Research Centre. [Downloadable!]
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