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Modelling loans to non-financial corporations in the euro area

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  • Christoffer Kok Sørensen

    ()
    (European Central Bank)

  • David Marqués Ibáñez

    ()
    (European Central Bank)

  • Carlotta Rossi

    ()
    (Bank of Italy)

Abstract

We model the determinants of loans to non-financial corporations in the euro area. Using the Johansen (1992) methodology, we identify three cointegrating relationships. These relationships are interpreted as the long-run loan demand, investment and loan supply equations. The short-run dynamics of loan demand for the euro area are subsequently modelled using a Vector Error Correction Model (VECM). We perform a number of specification tests, which suggest that developments in loans to non-financial corporations in the euro area can be reasonably explained by the model. We then use the estimated model to analyse the impact of permanent and temporary shocks to the policy rate on bank lending to non-financial corporations.

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Bibliographic Info

Paper provided by Bank of Italy, Economic Research and International Relations Area in its series Temi di discussione (Economic working papers) with number 857.

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Date of creation: Feb 2012
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Handle: RePEc:bdi:wptemi:td_857_12

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Keywords: loans to non-financial corporations; credit.;

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References

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  1. Calza, Alessandro & Gartner, Christine & Sousa, João, 2001. "Modelling the demand for loans to the private sector in the euro area," Working Paper Series 0055, European Central Bank.
  2. Michael Ehrmann & Leonardo Gambacorta & Jorge Martìnez-Pagès & Patrick Sevestre & Andreas Worms, 2001. "Fynancial Systems and the Role of Banks in Monetary Policy Transmission in the Euro area," Temi di discussione (Economic working papers) 432, Bank of Italy, Economic Research and International Relations Area.
  3. Jiminez, G. & Ongena, S. & Saurina, J., 2007. "Hazardous Times for Monetary Policy: What do Twenty-three Million Bank Loans Say about the Effects of Monetary Policy on Credit Risk?," Discussion Paper 2007-75, Tilburg University, Center for Economic Research.
  4. Oliver Hülsewig & Eric Mayer & Timo Wollmershäuser, 2005. "Bank Loan Supply and Monetary Policy Transmission in Germany: An Assessment Based on Matching Impulse Responses," Ifo Working Paper Series Ifo Working Papers No.14, Ifo Institute for Economic Research at the University of Munich.
  5. Gambacorta, Leonardo & Mistrulli, Paolo Emilio, 2004. "Does bank capital affect lending behavior?," Journal of Financial Intermediation, Elsevier, vol. 13(4), pages 436-457, October.
  6. Calza, Alessandro & Manrique, Marta & Sousa, Joao, 2006. "Credit in the euro area: An empirical investigation using aggregate data," The Quarterly Review of Economics and Finance, Elsevier, vol. 46(2), pages 211-226, May.
  7. Johansen, Soren, 1992. "Cointegration in partial systems and the efficiency of single-equation analysis," Journal of Econometrics, Elsevier, vol. 52(3), pages 389-402, June.
  8. Andrew Brigden & Paul Mizen, 1999. "Money, credit and investment in UK corporate sector," Bank of England working papers 100, Bank of England.
  9. Philip Lowe & Claudio Borio, 2002. "Asset prices, financial and monetary stability: exploring the nexus," BIS Working Papers 114, Bank for International Settlements.
  10. Andrew Brigden & Paul Mizen, 2004. "Interactions between Money, Lending and Investment in the UK Private Non-Financial Corporate Sector," Manchester School, University of Manchester, vol. 72(1), pages 72-99, 01.
  11. Boris Hofmann, 2001. "The determinants of private sector credit in industrialised countries: do property prices matter?," BIS Working Papers 108, Bank for International Settlements.
  12. Ignazio Angeloni & Michael Ehrmann, 2003. "Monetary transmission in the euro area: early evidence," Economic Policy, CEPR & CES & MSH, vol. 18(37), pages 469-501, October.
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Cited by:
  1. Alan Ahearne & Guntram B. Wolff, 2012. "The debt challenge in Europe," Working Papers 686, Bruegel.
  2. Sophocles Brissimis & Eugenie Garganas & Stephen G. Hall, 2012. "Consumer credit in an era of financial liberalisation: an overreaction to repressed demand?," Working Papers 148, Bank of Greece.
  3. Di Giulio, Daniele, 2009. "Bank lending to the production sector: credit crunch or extra-credit?," MPRA Paper 26824, University Library of Munich, Germany.
  4. repec:pra:mprapa:40579 is not listed on IDEAS
  5. Wilko Bolt & Leo de Haan & Marco Hoeberichts & Maarten van Oordt & Job Swank, 2010. "Bank Profitability during Recessions," DNB Working Papers 251, Netherlands Central Bank, Research Department.
  6. Leo de Haan & Jan Willem van den End, 2011. "Banks' responses to funding liquidity shocks: lending adjustment, liquidity hoarding and fire sales," DNB Working Papers 293, Netherlands Central Bank, Research Department.

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