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Credit Market Disequilibrium in Poland: Can We Find What We Expect? Non-Stationarity and the “Min”Condition

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  • Christophe Hurlin

    ()

  • Rafal Kierzenkowski

    ()

Abstract

This paper presents an empirical investigation of the disequilibrium hypothesis on the Polish loan market in the 1990s. Using data over this period of deep transition, we estimate a disequilibrium model with a standard maximum likelihood method. However, the estimates are highly counter-intuitive as regards the timing of the identified regimes. We show that the gap between the econometric evidence and the expected results may stem from the issue of stochastic non-stationarity in a disequilibrium setting based on the “min” condition. We find that the omission of one non-stationary variable of the cointegrating space or the absence of a “structural” cointegrating relationship in one or both regimes lead to a spurious configuration. In such a case, using, wrongly, the standard likelihood function, derived under the hypothesis of stationarity, may lead to non-convergent estimates of structural parameters and, as a consequence, to a fallacious regimes identification. Therefore, as the first approach to this issue, we estimate a disequilibrium model with stationary data. The empirical results are then robust and economically founded and correspond to the set and the timing of anticipated regimes.

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Bibliographic Info

Paper provided by William Davidson Institute at the University of Michigan in its series William Davidson Institute Working Papers Series with number 2003-581.

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Length: 29 pages
Date of creation: 01 Jun 2003
Date of revision:
Handle: RePEc:wdi:papers:2003-581

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Keywords: monetary standard and regimes; non-stationarity and cointegration; transition; Poland.;

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References

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  1. Kim, Hyun E., 1999. "Was the credit channel a key monetary transmission mechanism following the recent financial crisis in the Republic of Korea?," Policy Research Working Paper Series 2103, The World Bank.
  2. Mark Gertler & Simon Gilchrist, 1993. "The role of credit market imperfections in the monetary transmission mechanism: arguments and evidence," Finance and Economics Discussion Series 93-5, Board of Governors of the Federal Reserve System (U.S.).
  3. Maddala, G S & Nelson, Forrest D, 1974. "Maximum Likelihood Methods for Models of Markets in Disequilibrium," Econometrica, Econometric Society, vol. 42(6), pages 1013-30, November.
  4. Ceyla PazarbaÅŸioÄŸlu, 1997. "A Credit Crunch? Finland in the Aftermath of the Banking Crisis," IMF Staff Papers, Palgrave Macmillan, vol. 44(3), pages 315-327, September.
  5. Spencer Dale & Andrew Haldane, 1993. "Interest rates and the channels of monetary transmission: some sectoral estimates," Bank of England working papers 18, Bank of England.
  6. Ben S. Bernanke & Alan S. Blinder, 1988. "Credit, Money, and Aggregate Demand," NBER Working Papers 2534, National Bureau of Economic Research, Inc.
  7. International Monetary Fund, 2002. "Republic of Poland," IMF Staff Country Reports 02/128, International Monetary Fund.
  8. Fair, Ray C & Jaffee, Dwight M, 1972. "Methods of Estimation for Markets in Disequilibrium," Econometrica, Econometric Society, vol. 40(3), pages 497-514, May.
  9. Laroque, Guy & Salanie, Bernard, 1997. "Normal estimators for cointegrating relationships," Economics Letters, Elsevier, vol. 55(2), pages 185-189, August.
  10. Perez, Stephen J., 1998. "Testing for Credit Rationing: An Application of Disequilibrium Econometrics," Journal of Macroeconomics, Elsevier, vol. 20(4), pages 721-739, October.
  11. Sealey, C W, Jr, 1979. "Credit Rationing in the Commercial Loan Market: Estimates of a Structural Model under Conditions of Disequilibrium," Journal of Finance, American Finance Association, vol. 34(3), pages 689-702, June.
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Cited by:
  1. Balazs Egert & Ronald MacDonald, 2006. "Monetary Transmission Mechanism in Transition Economies: Surveying the Surveyable," CESifo Working Paper Series 1739, CESifo Group Munich.
  2. Fabrizio Coricelli & Balázs Égert & Ronald MacDonald, 2006. "Monetary Transmission Mechanism in Central & Eastern Europe: Gliding on a Wind of Change," William Davidson Institute Working Papers Series wp850, William Davidson Institute at the University of Michigan.
  3. Fabrizio Coricelli & Balázs Égert & Ronald MacDonald, 2006. "Monetary Transmission in Central and Eastern Europe: Gliding on a Wind of Change," Focus on European Economic Integration, Oesterreichische Nationalbank (Austrian Central Bank), issue 1, pages 44-87.
  4. Holmberg, Ulf, 2012. "Error Corrected Disequilibrium," UmeÃ¥ Economic Studies 837, Umeå University, Department of Economics.
  5. Srdjan Kujundzic & Dragiša Otaševic, 2012. "The bank lending channel in an euroised economy: the case of Serbia," Working papers 24, National Bank of Serbia.

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