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What Determines the Size of Bank Loans in Industrialized Countries? The Role of Government Debt

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  • Riccardo De Bonis

    () (Banca d'Italia, Economics and International Relations Area)

  • Massimiliano Stacchini

    (Banca d'Italia, Economics and International Relations Area)

Abstract

Given the importance of banking intermediation, we investigate the determinants of the size of bank loans in 18 OECD countries in the period 1981-1997. The aim of the paper is to show that the ratio of government debt to GDP has a negative effect on the level of bank credit. Second, countries with a German legal origin have higher ratios of loans to GDP than common law countries. Our results are robust to including such variables in the regressions as per capita GDP, stock market capitalization, the banking reserve requirement, the level of inflation and its volatility, openness to trade and the use of different econometric methods.

Suggested Citation

  • Riccardo De Bonis & Massimiliano Stacchini, 2010. "What Determines the Size of Bank Loans in Industrialized Countries? The Role of Government Debt," Mo.Fi.R. Working Papers 39, Money and Finance Research group (Mo.Fi.R.) - Univ. Politecnica Marche - Dept. Economic and Social Sciences.
  • Handle: RePEc:anc:wmofir:39
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    References listed on IDEAS

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    Cited by:

    1. Mihasonirina Andrianaivo & Charles Amo Yartey, 2009. "Understanding the Growth of African Financial Markets," IMF Working Papers 09/182, International Monetary Fund.

    More about this item

    Keywords

    bank loans; financial repression; government debt; legal origin of finance;

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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