On the Role of a Stock Market in the Bank Loan Market: a Study of France, Germany,and the Euro Area (1)
AbstractIn this paper we compare a traditional demand oriented model to a non-traditional capital budgeting model of bank lending based on movements in the equity cost of capital for France, Germany, and the Euro area. Using non-nested hypothesis tests and omitted variables tests, we find that we reject the traditional demand oriented model of bank lending and fail to reject the capital budgeting model of bank lending for Monetary Financial Institutions in France and the Euro area. For Germany the results are inconclusive. Even though Europe is a bank-based financial system, it appears the stock market plays a key role in the lending decisions of banks.
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Bibliographic InfoPaper provided by University of Urbino Carlo Bo, Department of Economics, Society & Politics - Scientific Committee - L. Stefanini & G. Travaglini in its series Working Papers with number 1009.
Length: 38 pages
Date of creation: 2010
Date of revision: 2010
Bank Loans; Stock Market; Non-nested Hypothesis Tests.;
Find related papers by JEL classification:
- E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
- E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
- G2 - Financial Economics - - Financial Institutions and Services
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-05-15 (All new papers)
- NEP-BAN-2010-05-15 (Banking)
- NEP-BEC-2010-05-15 (Business Economics)
- NEP-EEC-2010-05-15 (European Economics)
- NEP-MAC-2010-05-15 (Macroeconomics)
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