How Do Bank Lending Rates and the Supply of Loans React to Shifts in Loan Demand in the U.K.?
AbstractThis paper examines the pass-through from the market interest to the rate charged on bank loans using aggregate data for the U.K. Thereby, we explicitly disentangle credit supply and demand and allow the interest rate charged on loans to depend on the volume of loans. We find that, although banks adjust the lending rate to some extent, they largely accommodate shifts in demand. Overall, our results are consistent with the idea that banks provide insurance against liquidity shocks.
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Bibliographic InfoPaper provided by Department of Economics, Johannes Kepler University Linz, Austria in its series Economics working papers with number 2009-02.
Length: 19 pages
Date of creation: Mar 2009
Date of revision:
Interest Rate Pass-Through; Relationship Banking;
Other versions of this item:
- Burgstaller, Johann & Scharler, Johann, 2010. "How do bank lending rates and the supply of loans react to shifts in loan demand in the U.K.?," Journal of Policy Modeling, Elsevier, vol. 32(6), pages 778-791, November.
- E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
- G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-03-28 (All new papers)
- NEP-BAN-2009-03-28 (Banking)
- NEP-CBA-2009-03-28 (Central Banking)
- NEP-FMK-2009-03-28 (Financial Markets)
- NEP-MAC-2009-03-28 (Macroeconomics)
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