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Bank Ownership and Credit Cycle: the lower sensitivity of public bank lending to the business cycle

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  • Duprey, T.

Abstract

Overall lending cyclicality increased in the years 2000s, but public bank lending remains significantly less cyclical than their private counterparts. This stylized fact is showed to hold empirically on a dataset of 140 countries over 1989-2009 covering 464 public banks and 72 privatizations while accounting for the unbalanced feature of the panel. Using a dataset on banking crisis and records about bank privatizations, I can control for nationalizations during crisis as well as the evolution of ownership status overtime. Nevertheless the cyclical properties remain heterogeneous depending (i) on the area considered --still procyclical in OECD countries, acyclical in Europe, while countercyclical for developing countries, or on (ii) the phase of the business cycle itself --with lower reactions to economic fluctuations in periods of recession, even in Europe, where credit expansion by public banks is then acyclical. As a robustness check, I indeed observe that newly privatized banks engage in more procyclical lending. In addition, most liability item, like short/long term liabilities or customer deposits, pattern the same reduced cyclicality, especially during economic downturns. Last, I do not find evidences that this cyclical pattern is encompassed by forced loans to the government nor institutional features.

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Bibliographic Info

Paper provided by Banque de France in its series Working papers with number 411.

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Length: 41 pages
Date of creation: 2012
Date of revision:
Handle: RePEc:bfr:banfra:411

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Keywords: lending cycle; procyclicality; public banking; privatizations.;

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