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Policy Regime Change And Corporate Credit In Bulgaria: Asymmetric Supply And Demand Responses

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  • Rumen Dobrinsky

    ()

  • Nikolay Markov

    ()

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    Abstract

    The paper seeks to assess how a major policy regime change – such as the introduction of the currency board in Bulgaria – affects the flow of bank credit to the corporate sector. An attempt is made to identify the determinants of corporate credit separately from the viewpoint of lenders and borrowers. The estimated credit supply and credit demand equations provide empirical evidence of important changes in microeconomic behavioral patterns which can be associated with the policy regime change. The results also suggest a considerable asymmetry in the response of credit supply and credit demand to the policy shock: while the supply shifts were quite pronounced, the patterns of firms’ credit demand remained fairly stable. The policy implications of the detected asymmetry in microeconomic adjustment are also discussed in the paper.

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    File URL: http://www.wdi.umich.edu/files/Publications/WorkingPapers/wp607.pdf
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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 2003-607.

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    Length: 33 pages
    Date of creation: 01 Sep 2003
    Date of revision:
    Handle: RePEc:wdi:papers:2003-607

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    Keywords: corporate credit; credit supply and credit demand; regime change; currency board; transition economy;

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    1. Stephen D. Oliner & Glenn D. Rudebusch, 1994. "Is there a broad credit channel for monetary policy?," Working Paper Series / Economic Activity Section 146, Board of Governors of the Federal Reserve System (U.S.).
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    8. Stiglitz, Joseph E & Weiss, Andrew, 1981. "Credit Rationing in Markets with Imperfect Information," American Economic Review, American Economic Association, vol. 71(3), pages 393-410, June.
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    13. Berglof, Erik & Roland, Gerard, 1998. "Soft Budget Constraints and Banking in Transition Economies," Journal of Comparative Economics, Elsevier, vol. 26(1), pages 18-40, March.
    14. Colin Mayer, 1998. "Financial Systems and Corporate Governance: A Review of the International Evidence," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 154(1), pages 144-, March.
    15. Charles X. Hu, 1999. "Leverage, monetary policy, and firm investment," Economic Review, Federal Reserve Bank of San Francisco, pages 32-39.
    16. Laura Rondi & Brian Sack & Fabio Schiantarelli & Alessandro Sembenelli, 1998. "Firms' Financial and Real Responses to Monetary Tightening: Evidence for Large and Small Italian Companies," Giornale degli Economisti, GDE (Giornale degli Economisti e Annali di Economia), Bocconi University, vol. 57(1), pages 35-64, April.
    17. Diamond, Douglas W, 1984. "Financial Intermediation and Delegated Monitoring," Review of Economic Studies, Wiley Blackwell, vol. 51(3), pages 393-414, July.
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