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Modelling loans to non-financial corporations in the euro area

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  • Kok, Christoffer
  • Marqués-Ibáñez, David
  • Rossi, Carlotta

Abstract

We model the determinants of loans to non-financial corporations in the euro area. Using the Johansen (1992) methodology, we identify three cointegrating relationships. These relationships are interpreted as the long-run loan demand, investment and loan supply equations. The short-run dynamics of loan demand for the euro area are subsequently modelled by means of a Vector Error Correction Model (VECM). We perform a number of specification tests, which suggest that developments in loans to non-financial corporations in the euro area can be reasonably explained by the model. We then use the estimated model to analyse the impact of permanent and temporary shocks to the policy rate on bank lending to nonfinancial corporations. JEL Classification: C32, C51

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Bibliographic Info

Paper provided by European Central Bank in its series Working Paper Series with number 0989.

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Date of creation: Jan 2009
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Handle: RePEc:ecb:ecbwps:20090989

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Keywords: bank credit; cointegration; error-correction model; euro area; non-financial corporations;

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  1. Hülsewig, Oliver & Mayer, Eric & Wollmershäuser, Timo, 2006. "Bank loan supply and monetary policy transmission in Germany: An assessment based on matching impulse responses," Munich Reprints in Economics 19432, University of Munich, Department of Economics.
  2. Ignazio Angeloni & Michael Ehrmann, 2003. "Monetary transmission in the euro area: early evidence," Economic Policy, CEPR & CES & MSH, vol. 18(37), pages 469-501, October.
  3. Jiminez, G. & Ongena, S. & Saurina, J., 2007. "Hazardous Times for Monetary Policy: What do Twenty-three Million Bank Loans Say about the Effects of Monetary Policy on Credit Risk?," Discussion Paper 2007-75, Tilburg University, Center for Economic Research.
  4. Michael Ehrmann & Leonardo Gambacorta & Jorge Martìnez-Pagès & Patrick Sevestre & Andreas Worms, 2001. "Fynancial Systems and the Role of Banks in Monetary Policy Transmission in the Euro area," Temi di discussione (Economic working papers) 432, Bank of Italy, Economic Research and International Relations Area.
  5. Andrew Brigden & Paul Mizen, 1999. "Money, credit and investment in UK corporate sector," Bank of England working papers 100, Bank of England.
  6. Calza, Alessandro & Gartner, Christine & Sousa, João, 2001. "Modelling the demand for loans to the private sector in the euro area," Working Paper Series 0055, European Central Bank.
  7. Boris Hofmann, 2001. "The determinants of private sector credit in industrialised countries: do property prices matter?," BIS Working Papers 108, Bank for International Settlements.
  8. Andrew Brigden & Paul Mizen, 2004. "Interactions between Money, Lending and Investment in the UK Private Non-Financial Corporate Sector," Manchester School, University of Manchester, vol. 72(1), pages 72-99, 01.
  9. Calza, Alessandro & Manrique, Marta & Sousa, Joao, 2006. "Credit in the euro area: An empirical investigation using aggregate data," The Quarterly Review of Economics and Finance, Elsevier, vol. 46(2), pages 211-226, May.
  10. Johansen, Soren, 1992. "Cointegration in partial systems and the efficiency of single-equation analysis," Journal of Econometrics, Elsevier, vol. 52(3), pages 389-402, June.
  11. Philip Lowe & Claudio Borio, 2002. "Asset prices, financial and monetary stability: exploring the nexus," BIS Working Papers 114, Bank for International Settlements.
  12. Gambacorta, Leonardo & Mistrulli, Paolo Emilio, 2004. "Does bank capital affect lending behavior?," Journal of Financial Intermediation, Elsevier, vol. 13(4), pages 436-457, October.
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Cited by:
  1. Sophocles N. Brissimis & Eugenie N. Garganas & Stephen G. Hall, 2014. "Consumer credit in an era of financial liberalization: an overreaction to repressed demand?," Applied Economics, Taylor & Francis Journals, vol. 46(2), pages 139-152, January.
  2. de Haan, Leo & van den End, Jan Willem, 2013. "Banks’ responses to funding liquidity shocks: Lending adjustment, liquidity hoarding and fire sales," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 26(C), pages 152-174.
  3. Di Giulio, Daniele, 2009. "Bank lending to the production sector: credit crunch or extra-credit?," MPRA Paper 26824, University Library of Munich, Germany.
  4. Wilko Bolt & Leo de Haan & Marco Hoeberichts & Maarten van Oordt & Job Swank, 2010. "Bank Profitability during Recessions," DNB Working Papers 251, Netherlands Central Bank, Research Department.
  5. Alan Ahearne & Guntram B. Wolff, 2012. "The debt challenge in Europe," Working Papers 686, Bruegel.
  6. repec:pra:mprapa:40579 is not listed on IDEAS

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