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Credit Market Disequilibrium in Poland : Can We Find What We Expect ? Non-Stationarity and the"Min" Condition

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  • Hurlin, Christophe
  • Kierzenkowski, Rafal

Abstract

This paper presents an empirical investigation of the disequilibrium hypothesis on the Polish loan market in the 1990s. Using data over this period of deep transition, we estimate a disequilibrium model with a standard maximum likelihood method. However, the estimates are highly counter-intuitive as regards the timing of the identified regimes. We show that the gap between the econometric evidence and the expected results may stem from the issue of stochastic non-stationarity in a disequilibrium setting based on the “min” condition. We find that the omission of one non-stationary variable of the cointegrating space or the absence of a “structural” cointegrating relationship in one or both regimes lead to a spurious configuration. In such a case, using, wrongly, the standard likelihood function, derived under the hypothesis of stationarity, may lead to non-convergent estimates of structural parameters and, as a consequence, to a fallacious regimes identification. Therefore, as the first approach to this issue, we estimate a disequilibrium model with stationary data. The empirical results are then robust and economically founded and correspond to the set and the timing of anticipated regimes.

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Bibliographic Info

Paper provided by Paris Dauphine University in its series Economics Papers from University Paris Dauphine with number 123456789/3410.

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Date of creation: Jun 2003
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Handle: RePEc:dau:papers:123456789/3410

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Keywords: Non-stationarity and cointegration; Monetary standard and regimes; Disequilibrium;

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References

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  1. Gertler, Mark & Gilchrist, Simon, 1993. " The Role of Credit Market Imperfections in the Monetary Transmission Mechanism: Arguments and Evidence," Scandinavian Journal of Economics, Wiley Blackwell, vol. 95(1), pages 43-64.
  2. Ceyla PazarbaÅŸioÄŸlu, 1997. "A Credit Crunch? Finland in the Aftermath of the Banking Crisis," IMF Staff Papers, Palgrave Macmillan, vol. 44(3), pages 315-327, September.
  3. Dale, Spencer & Haldane, Andrew G., 1995. "Interest rates and the channels of monetary transmission: Some sectoral estimates," European Economic Review, Elsevier, vol. 39(9), pages 1611-1626, December.
  4. Fair, Ray C & Jaffee, Dwight M, 1972. "Methods of Estimation for Markets in Disequilibrium," Econometrica, Econometric Society, vol. 40(3), pages 497-514, May.
  5. Bernanke, Ben S & Blinder, Alan S, 1988. "Credit, Money, and Aggregate Demand," American Economic Review, American Economic Association, vol. 78(2), pages 435-39, May.
  6. Maddala, G S & Nelson, Forrest D, 1974. "Maximum Likelihood Methods for Models of Markets in Disequilibrium," Econometrica, Econometric Society, vol. 42(6), pages 1013-30, November.
  7. Kim, Hyun E., 1999. "Was the credit channel a key monetary transmission mechanism following the recent financial crisis in the Republic of Korea?," Policy Research Working Paper Series 2103, The World Bank.
  8. International Monetary Fund, 2002. "Republic of Poland," IMF Staff Country Reports 02/128, International Monetary Fund.
  9. Sealey, C W, Jr, 1979. "Credit Rationing in the Commercial Loan Market: Estimates of a Structural Model under Conditions of Disequilibrium," Journal of Finance, American Finance Association, vol. 34(3), pages 689-702, June.
  10. Laroque, Guy & Salanie, Bernard, 1997. "Normal estimators for cointegrating relationships," Economics Letters, Elsevier, vol. 55(2), pages 185-189, August.
  11. Perez, Stephen J., 1998. "Testing for Credit Rationing: An Application of Disequilibrium Econometrics," Journal of Macroeconomics, Elsevier, vol. 20(4), pages 721-739, October.
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Cited by:
  1. Balázs Égert & Ronald MacDonald, 2006. "Monetary Transmission Mechanism in Transition Economies: Surveying the Surveyable," MNB Working Papers 2006/5, Magyar Nemzeti Bank (the central bank of Hungary).
  2. Srdjan Kujundzic & Dragiša Otaševic, 2012. "The bank lending channel in an euroised economy: the case of Serbia," Working papers 24, National Bank of Serbia.
  3. Fabrizio Coricelli & Balázs Égert & Ronald MacDonald, 2006. "Monetary Transmission Mechanism in Central & Eastern Europe: Gliding on a Wind of Change," William Davidson Institute Working Papers Series wp850, William Davidson Institute at the University of Michigan.
  4. Fabrizio Coricelli & Balázs Égert & Ronald MacDonald, 2006. "Monetary Transmission in Central and Eastern Europe: Gliding on a Wind of Change," Focus on European Economic Integration, Oesterreichische Nationalbank (Austrian Central Bank), issue 1.
  5. Holmberg, Ulf, 2012. "Error Corrected Disequilibrium," UmeÃ¥ Economic Studies 837, Umeå University, Department of Economics.

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