In this paper we analyze the bank lending channel in Hungary. We provide a brief overview of the theory and the empirical approaches used to investigate the existence of bank lending channel. From the possible methods we use the generally applied approach suggested by Kahsyap and Stein (1995) which relies on discovering asymmetries in changes in the amount of loans to monetary actions in order to isolate supply and demand effects. We estimate an ARDL model where the asymmetric effects are captured by interaction-terms. We find significant asymmetric adjustment of loan quantities along certain bank characteristics. The existence of bank lending channel, and therefore loan supply decisions of banks, can explain these asymmetries. In addition, we do not find any sign for asymmetric loan demand adjustment along these variables. According to these findings, we cannot rule out the existence of the bank lending channel in Hungary.
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Paper provided by Magyar Nemzeti Bank (The Central Bank of Hungary) in its series MNB Working Papers with number
2006/7.
Find related papers by JEL classification: C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Mortgages
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