An Inquiry on Heterogeneity in Lending and Lending Rates

This paper contains two very simple empirical analyses of heterogeneiy in lending. The first one intends to test whether lenders' size, loans' size and risk and geographical factors affecting the «textbook » link between policy rate and lending raies. The second provides empirical evidence suggesting that lending to the larger borrowers is demand deterimined. For this purpose some dynamic panel data estimates are performed on the basis of a partially aggregate data set, specifically acquired frcim the Bank of Italy, which contains the data on interest rates, had debts and credit flows granted by different size categories of banks under the form of different size categoies of loans in different geographic areas of the country, for the period 1990 QI - 1998 QIV. The results show that the spread between interest rate on the various classes of bank loans and the monetary policy rate is not influenced by the loan size, while it seems to be more affected by proxies for risk. Furthermore, the behaviour of the largest size class of bank loans shows a pattern consistent with a demand determined behaviour, which suggests that (both according to the money view and the credit view) lending to the other smaller size classes is residually detemined.