This paper evaluates whether the Germany economy is currently affected by a credit crunch, i.e. a supply-side restriction of loans that is not in line with market interest rates and profitability of investment projects.With help of a disequilibrium- model, we calculate a credit supply and a demand-function. We compare estimated demand with estimated supply, finding a considerable excess- demand particularly in the second half of 2002. The main reason for this restriction is the drop in earnings in the banking sector. Applying the model to Großbanken (big banks) and other credit institutions separately, shows that the situation in the former is more severe than in the latter.
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Paper provided by Rheinisch-Westfälisches Institut für Wirtschaftsforschung in its series RWI Discussion Papers with number
0006.
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Find related papers by JEL classification: C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Mortgages
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