The Breakdown of Credit Relations under Conditions of a Banking Crisis. A Switching Regime Approach
AbstractThis paper empirically analyses the effects of a banking crisis on bank credit to the private sector for a panel of developing, developed, and transition economies for the period 1970-1998. The model illustrates how the behaviour of the bank credit function changes during a banking crisis, reflecting a generalized disruption in the stability of behavioural parameters. Usual links such as interest rate signalling on lending, and synergy between deposits and loans, fall apart. Moreover, this study gives support to Third Generation Models in their ability to predict banking crises. Based on the empirical findings, the paper then provides policy implications for monetary policy.
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Bibliographic InfoPaper provided by Royal Economic Society in its series Royal Economic Society Annual Conference 2002 with number 146.
Date of creation: 29 Aug 2002
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