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Other financial corporations: Cinderella or ugly sister of empirical monetary economics?

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  • K Alec Chrystal
  • Paul Mizen

Abstract

This paper reports estimates of an econometric model of the determinants of OFCs' broad money holding and M4 lending to OFCs. This is of interest as it gives information about a component of UK money and credit aggregates, and also because it provides some evidence of the link between financial activity and growth of the real economy. The long-run equilibria for money holding and lending to this sector are modelled as being driven by GDP, wealth, the return to financial services and various interest rate spreads. The dynamics of OFCs' money and lending are shown to be interdependent. The evidence for interactions between OFCs and other sectors are then considered. The results indicate that M4 lending to OFCs is significantly related to aggregate investment in the long run, but is largely unrelated to the spending of households.

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File URL: http://www.bankofengland.co.uk/archive/Documents/historicpubs/workingpapers/2002/wp151.pdf
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Bibliographic Info

Paper provided by Bank of England in its series Bank of England working papers with number 151.

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Date of creation: Dec 2001
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Handle: RePEc:boe:boeewp:151

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  1. Thorsten Beck & Ross Levine & Norman Loayza, 1999. "Financial Intermediation and Growth: Causality and Causes," Working Papers Central Bank of Chile 56, Central Bank of Chile.
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  4. K Alec Chrystal & Paul Mizen, 2001. "Consumption, money and lending: a joint model for the UK household sector," Bank of England working papers 134, Bank of England.
  5. Ryland Thomas, 1997. "The Demand for M4: A Sectoral Analysis Part 2 The Corporate Sector," Bank of England working papers 62, Bank of England.
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  10. Scott, Alasdair, 2003. "APPLIED MACROECONOMETRICS Carlo A. Favero Oxford University Press, 2001," Macroeconomic Dynamics, Cambridge University Press, vol. 7(02), pages 313-315, April.
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  15. Granger, Clive W J, 1986. "Developments in the Study of Cointegrated Economic Variables," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 48(3), pages 213-28, August.
  16. Ryland Thomas, 1997. "The Demand for M4: A Sectoral Analysis. Part 1 - The Personal Sector," Bank of England working papers 61, Bank of England.
  17. Engle, Robert F & Granger, Clive W J, 1987. "Co-integration and Error Correction: Representation, Estimation, and Testing," Econometrica, Econometric Society, vol. 55(2), pages 251-76, March.
  18. Drake, Leigh & Chrystal, K Alec, 1994. "Company-Sector Money Demand: New Evidence on the Existence of a Stable Long-Run Relationship for the United Kingdom," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 26(3), pages 479-94, August.
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Cited by:
  1. Bruggeman, Annick & Donnay, Marie, 2003. "A monthly monetary model with banking intermediation for the euro area," Working Paper Series 0264, European Central Bank.
  2. Jawadi, Fredj & Sousa, Ricardo M., 2013. "Money demand in the euro area, the US and the UK: Assessing the role of nonlinearity," Economic Modelling, Elsevier, vol. 32(C), pages 507-515.
  3. Giuseppe Ferrero & Andrea Nobili & Patrizia Passiglia, 2007. "The sectoral distribution of money supply in the Euro area," Temi di discussione (Economic working papers) 627, Bank of Italy, Economic Research and International Relations Area.
  4. Chrystal, Alec & Mizen, Paul, 2002. "Modelling credit in the transmission mechanism of the United Kingdom," Journal of Banking & Finance, Elsevier, vol. 26(11), pages 2131-2154, November.

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