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Modelling the demand for loans to the private sector in the euro area

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Author Info
A. Calza
C. Gartner
J. Sousa

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Abstract

This article studies the determinants of loans to the private sector in the euro area. Using the Johansen methodology, the study identifies one cointegrating relationship linking real loans, GDP and interest rates. This relationship implies that in the long-run real loans are positively related to real GDP and negatively to real short-term and long-term interest rates. Both the signs and the magnitude of the coefficients suggest that the cointegrating vector describes a long-run demand equation. The short-run dynamics of the demand for euro area real loans is subsequently modelled by means of a Vector Error Correction Model (VECM). A number of specification tests performed on the VECM produce satisfactory results, with tests of stability of the model parameters showing no signs of structural breaks during the sample period (1980: 1-1999: 2). All of this suggests that developments in real loans to the private sector in the euro area can be reasonably explained by the model.

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

Volume (Year): 35 (2003)
Issue (Month): 1 (January)
Pages: 107-117
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Handle: RePEc:taf:applec:v:35:y:2003:i:1:p:107-117

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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.:
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  16. Godfrey, Leslie G, 1978. "Testing against General Autoregressive and Moving Average Error Models When the Regressors Include Lagged Dependent Variables," Econometrica, Econometric Society, vol. 46(6), pages 1293-1301, November. [Downloadable!] (restricted)
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