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Bank Lending Standards, Loan Demand, and the Macroeconomy: Evidence from the Korean Bank Loan Other Survey

Author

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  • Sangyup Choi

    (Yonsei University)

Abstract

Using the bank loan officer surveys from 12 countries, we document a novel cyclical pattern found in bank lending standards and loan demand, which differs between market-based and bank-based economies; in particular, the lending rate fails to reflect the credit market conditions in bank-based economies. Using the Korean economy as an example, we demonstrate the failure of identification of loan supply shocks when relying on the lending rate and propose novel identifying schemes by exploiting the information from the survey. Our findings suggest that disentangling the supply and demand factors of credit shocks is crucial to understand their macroeconomic effects.

Suggested Citation

  • Sangyup Choi, 2020. "Bank Lending Standards, Loan Demand, and the Macroeconomy: Evidence from the Korean Bank Loan Other Survey," GRU Working Paper Series GRU_2020_006, City University of Hong Kong, Department of Economics and Finance, Global Research Unit.
    • Handle: RePEc:cth:wpaper:gru_2020_006
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    File URL: https://www.cb.cityu.edu.hk/ef/doc/GRU/WPS/GRU%232020-006%20Choi.pdf
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    Cited by:

    1. Youngjin Yun & Byoungsoo Cho, 2021. "Is the Monetary Policy Effect Different for Bank Lending to Households and Firms?," GRU Working Paper Series GRU_2021_001, City University of Hong Kong, Department of Economics and Finance, Global Research Unit.

    More about this item

    Keywords

    Bank loan officer survey; Sign-restriction VARs; Bank lending shocks; Credit market disequilibrium; Bank-based economies;
    All these keywords.

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers

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