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Abstract

This paper investigates the relationship between bank competition and credit procyclicality for 17 OECD countries on the 1986-2009 period. We account for heterogeneity among countries in terms of bank competition through the use of a hierarchical clustering methodology. We then estimate panel VAR models for the identified sub-groups of economies to investigate whether credit procyclicality is more important when the degree of bank competition is high. Our findings show that while credit significantly responds to shocks to GDP, the degree of bank competition is not essential in assessing the procyclicality of credit for OECD countries.

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Bibliographic Info

Paper provided by CEPII research center in its series Working Papers with number 2010-25.

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Date of creation: Nov 2010
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Handle: RePEc:cii:cepidt:2010-25

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Related research

Keywords: Credit cycle; Economic cycle; Bank competition; Financial stability; Panel VAR;

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Find related papers by JEL classification:

• C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Longitudinal Data; Spatial Time Series
• E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
• E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
• G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

References

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1. Gianni De Nicolo & Elena Loukoianova, 2007. "Bank ownership, market structure, and risk," Proceedings, Federal Reserve Bank of Chicago, issue May, pages 377-3395.
   
   • Gianni De Nicoló & Elena Loukoianova, 2007. "Bank Ownership, Market Structure and Risk," IMF Working Papers 07/215, International Monetary Fund.
2. Katrin Assenmacher-Wesche & Stefan Gerlach, 2008. "Financial Structure and the Impact of Monetary Policy on Asset Prices," Working Papers 2008-16, Swiss National Bank.
   
   • Katrin Assenmacher-Wesche & Stefan Gerlach, 2008. "Financial Structure and the Impact of Monetary Policy on Asset Prices," CFS Working Paper Series 2008/30, Center for Financial Studies.
3. Katrin Assenmacher-Wesche & Stefan Gerlach, 2008. "Monetary policy, asset prices and macroeconomic conditions : a panel-VAR study," Working Paper Research 149, National Bank of Belgium.
4. Im, Kyung So & Pesaran, M. Hashem & Shin, Yongcheol, 2003. "Testing for unit roots in heterogeneous panels," Journal of Econometrics, Elsevier, vol. 115(1), pages 53-74, July.
   
   • Tom Doan, . "IPSHIN: RATS procedure to implement Im, Pesaran and Shin panel unit root test," Statistical Software Components RTS00098, Boston College Department of Economics.
   • Pasaran, M.H. & Im, K.S. & Shin, Y., 1995. "Testing for Unit Roots in Heterogeneous Panels," Cambridge Working Papers in Economics 9526, Faculty of Economics, University of Cambridge.

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