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A Credit Crunch? a Case Study of Finland in the Aftermath of the Banking Crisis

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  • Ceyla Pazarbasioglu
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    Abstract

    This paper estimates a disequilibrium model of credit supply and demand to evaluate whether there was a credit crunch in Finland following the banking crisis of 1991-92. Empirical analysis suggests that the marked reduction in bank lending was mainly in reaction to a cyclical decline in credit demand, likely exacerbated by the high level of indebtedness of the borrowers. It also appears that banks became less willing to supply credit during periods associated with a deterioration in asset quality, and reduced profits due to declining regulatory protection from competition, and a need to increase capital adequacy levels.

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    File URL: http://www.imf.org/external/pubs/cat/longres.aspx?sk=1953
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    Bibliographic Info

    Paper provided by International Monetary Fund in its series IMF Working Papers with number 96/135.

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    Length: 18
    Date of creation: 01 Dec 1996
    Date of revision:
    Handle: RePEc:imf:imfwpa:96/135

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    Cited by:
    1. Demetriades, Panicos O. & Fattouh, Bassam A, 2006. "Excess Credit and the South Korean Crisis," Working Paper Series RP2006/84, World Institute for Development Economic Research (UNU-WIDER).
    2. Yuan, Mingwei & Zimmermann, Christian, 2004. "Credit crunch in a model of financial intermediation and occupational choice," Journal of Macroeconomics, Elsevier, vol. 26(4), pages 637-659, December.
    3. Paolo Del Giovane & Andrea Nobili & Federico Maria Signoretti, 2013. "Supply tightening or lack of demand? An analysis of credit developments during the Lehman Brothers and the sovereign debt crises," Temi di discussione (Economic working papers) 942, Bank of Italy, Economic Research and International Relations Area.
    4. Nada Oulidi & Laurence Allain, 2009. "Credit Market in Morocco," IMF Working Papers 09/53, International Monetary Fund.
    5. Mingwei Yuan & Christian Zimmermann, 1999. "Credit Crunch, Bank Lending and Monetary Policy: A Model of Financial Intermediation with Heterogeneous Projects," Cahiers de recherche CREFE / CREFE Working Papers 89, CREFE, Université du Québec à Montréal.

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