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How Do Bank Lending Rates and the Supply of Loans React to Shifts in Loan Demand in the U.K.?

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  • Johann Burgstaller
  • Johann Scharler

Abstract

This 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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File URL: http://www.econ.jku.at/papers/2009/wp0902.pdf
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Bibliographic Info

Paper provided by Department of Economics, Johannes Kepler University Linz, Austria in its series Economics working papers with number 2009-02.

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Length: 19 pages
Date of creation: Mar 2009
Date of revision:
Handle: RePEc:jku:econwp:2009_02

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Keywords: Interest Rate Pass-Through; Relationship Banking;

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Cited by:
  1. Wadud, I.K.M. Mokhtarul & Bashar, Omar H.M.N. & Ahmed, Huson Joher Ali, 2012. "Monetary policy and the housing market in Australia," Journal of Policy Modeling, Elsevier, vol. 34(6), pages 849-863.

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