We show by means of a bank relationship model that after monetary policy tightening, public firms are more likely to decrease their demand for bank loans than private firms, which are typically more dependent on bank credit and benefit more from relationship lending. In order to test this hypothesis, we set up an empirical model relating the use of bank and other debt by private and public firms to an indicator of monetary policy (the short-term interest rate) and a set of firm-level control variables. Our estimation results, based on a sample of around 22,000 firms in the euro area plus the UK during most of the 1990s, yield evidence in favour of relationship lending, particularly for private and small firms.
Download Info
To download:
If you experience problems downloading a file, check if you have the
proper application to
view it first. Information about this may be contained
in the File-Format links below. In case of further problems read
the IDEAS help
page. Note that these files are not on the IDEAS
site. Please be patient as the files may be large.
Publisher Info
Paper provided by University of Groningen, CCSO Centre for Economic Research in its series CCSO Working Papers with number
200212.