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Identification of a Loan Supply Function: A Cross-Country Test for the Existence of a Bank Lending Channel

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Author Info
Sophocles N. Brissimis () (Bank of Greece and University of Piraeus)
Matthaios D. Delis (Athens University of Economics and Business)

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Abstract

Using the theoretical predictions of the Bernanke-Blinder (1988) model, we seek to examine the existence of a bank lending channel through the empirical identification of a loan supply function and to assess the impact of differential bank characteristics on banks’ ability to supply loans. To this end, we estimate a loan supply model and test for the restrictions implied by perfect substitutability between loans and bonds in bank portfolios. Estimations are carried out on bank panel data for 16 OECD countries, the results showing that a bank lending channel is at work in only two of them. Moreover, and contrary to standard accounts, we find that the relevance of bank characteristics is hardly a decisive factor in the identification of a loan supply function.

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Publisher Info
Paper provided by Bank of Greece in its series Working Papers with number 54.

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Length: 31 pages
Date of creation: Jan 2007
Date of revision:
Handle: RePEc:bog:wpaper:54

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Related research
Keywords: Bank lending channel financial structure dynamic panels

Find related papers by JEL classification:
C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data
C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation and Testing
E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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    Other versions:
  5. Gambacorta, Leonardo, 2005. "Inside the bank lending channel," European Economic Review, Elsevier, vol. 49(7), pages 1737-1759, October. [Downloadable!] (restricted)
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  14. Claire Loupias & Frederique Savignac & Patrick Sevestre, 2001. "Monetary policy and bank lending in France: are there asymmetries?," Working Paper Series 101, European Central Bank. [Downloadable!]
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