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Loan supply in Germany during the financial crisis

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  • Busch, Ulrike
  • Scharnagl, Michael
  • Scheithauer, Jan
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    Abstract

    Distinguishing pure supply effects from other determinants of price and quantity in the market for loans is a notoriously difficult problem. Using German data, we employ Bayesian vector autoregressive models with sign restrictions on the impulse response functions in order to enquire the role of loan supply and monetary policy shocks for the dynamics of loans to non-financial corporations. For the three quarters following the Lehman collapse, we find very strong negative loan supply shocks, while monetary policy was essentially neutral. Nevertheless, the historical decomposition shows a cumulated negative impact of loan supply shocks and monetary policy shocks on loans to non-financial corporations, due to the lagged effects of past loan supply and monetary policy shocks. However, these negative effects on loans to non-financial corporations are overcompensated by positive other shocks, which implies that loans developed more favorably than implied by the model, over the past few quarters. --

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    Bibliographic Info

    Paper provided by Deutsche Bundesbank, Research Centre in its series Discussion Paper Series 1: Economic Studies with number 2010,05.

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    Date of creation: 2010
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    Handle: RePEc:zbw:bubdp1:201005

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    Keywords: Loan supply; Bayesian VAR; sign restrictions;

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    1. Kadiyala, K Rao & Karlsson, Sune, 1997. "Numerical Methods for Estimation and Inference in Bayesian VAR-Models," Journal of Applied Econometrics, John Wiley & Sons, Ltd., John Wiley & Sons, Ltd., vol. 12(2), pages 99-132, March-Apr.
    2. Juan F. Rubio-Ramirez & Daniel Waggoner & Tao Zha, 2006. "Markov-Switching Structural Vector Autoregressions: Theory and Application," Computing in Economics and Finance 2006, Society for Computational Economics 69, Society for Computational Economics.
    3. Peersman, Gert, 2003. "What Caused the Early Millennium Slowdown? Evidence Based on Vector Autoregressions," CEPR Discussion Papers, C.E.P.R. Discussion Papers 4087, C.E.P.R. Discussion Papers.
    4. Eric M. Leeper & Christopher A. Sims & Tao Zha, 1996. "What Does Monetary Policy Do?," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 27(2), pages 1-78.
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    Cited by:
    1. Milcheva, Stanimira, 2013. "A bank lending channel or a credit supply shock?," Journal of Macroeconomics, Elsevier, Elsevier, vol. 37(C), pages 314-332.
    2. Gambetti, Luca & Musso, Alberto, 2012. "Loan supply shocks and the business cycle," Working Paper Series, European Central Bank 1469, European Central Bank.
    3. Nikolay Hristov & Oliver Hülsewig & Timo Wollmershäuser, 2011. "Loan Supply Shocks during the Financial Crisis: Evidence for the Euro Area," CESifo Working Paper Series 3395, CESifo Group Munich.
    4. Mthuli Ncube & Eliphas Ndou, 2013. "Working Paper 169 - Monetary Policy and Exchange Rate Shocks on South African Trade Balance," Working Paper Series, African Development Bank 448, African Development Bank.
    5. Eickmeier, Sandra & Gambacorta, Leonardo & Hofmann, Boris, 2014. "Understanding global liquidity," European Economic Review, Elsevier, Elsevier, vol. 68(C), pages 1-18.
    6. Nikolaychuk Sergiy & Shapovalenko Nadiia, 2013. "The identification of the sources of current account fluctuations in Ukraine," EERC Working Paper Series 13/12e, EERC Research Network, Russia and CIS.
    7. Staszewska-Bystrova, Anna & Winker, Peter, 2013. "Constructing narrowest pathwise bootstrap prediction bands using threshold accepting," International Journal of Forecasting, Elsevier, Elsevier, vol. 29(2), pages 221-233.
    8. Torsten Schmidt & Lina Zwick, 2012. "In Search for a Credit Crunch in Germany," Ruhr Economic Papers, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen 0361, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.

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