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Further evidence on the credit view: the case of Finland

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  • Ali Anari
  • James Kolari
  • Seppo Pynnonen
  • Antti Suvanto
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    Abstract

    The present paper provides further empirical evidence on the credit view (i.e., bank credit availability has a positive impact on macroeconomic activity) by investigating the case of Finland. The Finnish economy suffered a severe recession in the early 1990s that was marked by widespread banking crisis and extensive government intervention. Using monthly data for the 1980-1996 period, unrestricted and restricted vector autoregression (VAR) models with GDP, money supply, consumer prices, bank credit, and exports were estimated. It is found that, while money supply had the largest effect on economic output, bank credit exhibited a fairly strong effect on output that exceeded price effects for the most part. Exports had little impact on fluctuations in GDP but did help to explain industrial output changes over time. Based on these results, it is concluded that there is empirical support for the credit view in Finland. By implication, government intervention in Finland to restore safety and soundness during the banking crisis likely limited further damage to the macroeconomy associated with disruption of credit intermediation services.

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    File URL: http://www.tandfonline.com/doi/abs/10.1080/00036840110047592
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    Bibliographic Info

    Article provided by Taylor & Francis Journals in its journal Applied Economics.

    Volume (Year): 34 (2002)
    Issue (Month): 3 ()
    Pages: 267-278

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    Handle: RePEc:taf:applec:v:34:y:2002:i:3:p:267-278

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    Cited by:
    1. Leonardo Becchetti & Melody Garcia & Giovanni Trovato, 2009. "Credit rationing and credit view: empirical evidence from loan data," CEIS Research Paper 144, Tor Vergata University, CEIS, revised 30 Sep 2009.
    2. Ferreira, Paula & Soares, Isabel & Araujo, Madalena, 2005. "Liberalisation, consumption heterogeneity and the dynamics of energy prices," Energy Policy, Elsevier, vol. 33(17), pages 2244-2255, November.
    3. Rondorf, Ulrike, 2012. "Are bank loans important for output growth?," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 22(1), pages 103-119.

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