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Liquidity Shocks Transmission to Lending Activity in the Romanian Banking System. A VAR Approach

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  • Horaţiu LOVIN

    (National Bank of Romania)

Abstract

The Romanian banking system has been dominated by foreign-owned banks since 2007, when the country joined the European Union. The implications for financial stability are twofold. First, the cross-border financial groups brought strong expertise in risk management and improved access to funding. Second, the vulnerability to external shocks increases, which off-set to some extent the aforementioned benefits. The global liquidity shock triggered by the Lehman Brothers failure in September 2008 and the following global turmoil had strong impact on the Romanian banking system. This study aims to determine the influence of the external liquidity shock to domestic lending activity using a VAR model. The empirical results underline the external funding as a transmission channel for external liquidity shock to credit activity in Romania.

Suggested Citation

  • Horaţiu LOVIN, 2015. "Liquidity Shocks Transmission to Lending Activity in the Romanian Banking System. A VAR Approach," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(2), pages 48-60, June.
    • Handle: RePEc:rjr:romjef:v::y:2015:i:2:p:48-60
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    References listed on IDEAS

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    5. Dinger, Valeriya, 2009. "Do foreign-owned banks affect banking system liquidity risk?," Journal of Comparative Economics, Elsevier, vol. 37(4), pages 647-657, December.
    6. Braun, Phillip A. & Mittnik, Stefan, 1993. "Misspecifications in vector autoregressions and their effects on impulse responses and variance decompositions," Journal of Econometrics, Elsevier, vol. 59(3), pages 319-341, October.
    7. Aiyar, Shekhar, 2011. "How did the crisis in international funding markets affect bank lending? Balance sheet evidence from the United Kingdom," Bank of England working papers 424, Bank of England.
    8. Omer Ozcicek, 1997. "A comparison of lag structure specification methods in VAR models," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 25(2), pages 222-222, June.
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    Cited by:

    1. Cristian ANGHEL, 2019. "Risk management associated with the interbank relationships," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania - AGER, vol. 0(3(620), A), pages 87-98, Autumn.

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    More about this item

    Keywords

    bank funding; lending; contagion; financial stability; risk management;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G01 - Financial Economics - - General - - - Financial Crises

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