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Backtesting the efficiency of MNB’s Lending Survey

  • Ákos Bakonyi

    ()

    (Magyar Nemzeti Bank (central bank of Hungary))

  • Dániel Homolya

    ()

    (Magyar Nemzeti Bank (central bank of Hungary))

This article briefly presents the general practice of lending surveys aimed at revealing loan supply behaviour, as well as the literature analysing their usability. The focus of our analysis is the so-called Lending Survey (SLO), conducted by the MNB since 2003. In the context of our backtesting based on data available up to December 2008, we examined whether there were any contradictions in banks’ responses and how usable the results were from the perspective of lending and growth forecasts. Based on the results, it can be established that banks are consistent in their answers, so there is a strong relationship between their forward-looking and subsequent, retrospective answers. The correlation between the changes in lending standards and the volume of loan portfolios is weak. This is due to the fact that in the Hungarian banking sector the increase in loan portfolios over the past five years may have been influenced not only by supply-side behaviour, but also by demand for loans and economic growth to a great extent. We also examined the correlation between changes in corporate lending standards and GDP growth, which proved to be significant. Nevertheless, we cannot draw conclusions about the direction of the cause and effect relationship based solely on the establishment of correlation, in other words about whether banks act procyclically or whether corporate lending behaviour plays a decisive role in economic growth. The strength of our analysis is limited by the brevity of the available time series and by the fact that we were unable to observe the entire loan cycle during the period under review. Later, with the expansion of the Lending Survey’s data series, it will be worthwhile to pursue our examination.

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File URL: http://english.mnb.hu/Root/Dokumentumtar/ENMNB/Kiadvanyok/mnben_mnbszemle/mnben_mnb_bulletin_majus_2009/bakonyi-homolya_en.pdf
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Article provided by Magyar Nemzeti Bank (the central bank of Hungary) in its journal MNB Bulletin.

Volume (Year): 4 (2009)
Issue (Month): 1 (May)
Pages: 6-14

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Handle: RePEc:mnb:bullet:v:4:y:2009:i:1:p:6-14
Contact details of provider: Web page: http://www.mnb.hu/

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  1. Ben S. Bernanke & Alan S. Blinder, 1988. "Credit, Money, and Aggregate Demand," NBER Working Papers 2534, National Bureau of Economic Research, Inc.
  2. Giovanni Dell’Ariccia & Deniz Igan & Luc Laeven, 2012. "Credit Booms and Lending Standards: Evidence from the Subprime Mortgage Market," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 44, pages 367-384, 03.
  3. Lown, Cara & Morgan, Donald P., 2006. "The Credit Cycle and the Business Cycle: New Findings Using the Loan Officer Opinion Survey," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 38(6), pages 1575-1597, September.
  4. Stacey L. Schreft & Raymond E. Owens, 1991. "Survey evidence of tighter credit conditions: what does it mean?," Working Paper 91-05, Federal Reserve Bank of Richmond.
  5. 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.
  6. Jesper Berg & Annalisa Ferrando & Gabe de Bondt & Silvia Scopel, 2005. "The bank lending survey for the euro area," Occasional Paper Series 23, European Central Bank.
  7. Güner, A. Burak, 2008. "Bank lending opportunities and credit standards," Journal of Financial Stability, Elsevier, vol. 4(1), pages 62-87, April.
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