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A Credit Crunch? Finland in the Aftermath of the Banking Crisis

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  • Ceyla PazarbaÅŸioÄŸlu

    (International Monetary Fund)

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    Abstract

    This paper estimates a disequilibrium model of credit supply and demand to evaluate whether there was a credit crunch in Finland following the banking crisis of 1991-92. Empirical analysis suggests that the marked reduction in bank lending was mainly in reaction to a cyclical decline in credit demand, likely exacerbated by the high level of indebtedness of the borrowers. It also appears that banks became less willing to supply credit during periods associated with a deterioration in asset quality, as well as because of reduced profits owing to declining regulatory protection from competition and the need to increase capital adequacy levels.

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    Bibliographic Info

    Article provided by Palgrave Macmillan in its journal Staff Papers - International Monetary Fund.

    Volume (Year): 44 (1997)
    Issue (Month): 3 (September)
    Pages: 315-327

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    Handle: RePEc:pal:imfstp:v:44:y:1997:i:3:p:315-327

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    Cited by:
    1. Christophe Hurlin & Rafal Kierzenkowski, 2002. "A Theoretical and Empirical Assessment of the Bank Lending Channel and Loan Market Disequilibrium in Poland," National Bank of Poland Working Papers, National Bank of Poland, Economic Institute 22, National Bank of Poland, Economic Institute.
    2. Adolfo Barajas & Enrique López & Hugo Oliveros, . "¿Por qué en Colombia el Crédito al Sector Privado es tan Reducido," Borradores de Economia 185, Banco de la Republica de Colombia.
    3. Honkapohja, Seppo & Koskela, Erkki, 2002. "The Economic Crisis of the 1990s in Finland," Discussion Papers, The Research Institute of the Finnish Economy 683, The Research Institute of the Finnish Economy.
    4. Christophe Hurlin & Rafal Kierzenkowski, 2003. "Credit Market Disequilibrium in Poland: Can We Find What We Expect? Non-Stationarity and the “Min”Condition," William Davidson Institute Working Papers Series, William Davidson Institute at the University of Michigan 2003-581, William Davidson Institute at the University of Michigan.
    5. Sylvanus Ikhide, 2003. "Was There a Credit Crunch in Namibia Between 1996-2000?," Journal of Applied Economics, Universidad del CEMA, vol. 0, pages 269-290, November.
    6. Ferri, Giovanni & Tae Soo Kang, 1999. "The credit channel at work - lessons from the Republic of Korea's financial crisis," Policy Research Working Paper Series, The World Bank 2190, The World Bank.

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