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Disentangling the effect of supply and demand factors on bank lending. Evidence from Bank Lending Survey in Azerbaijan

Author

Listed:
  • Ilkin Huseynov

    (Central Bank of Azerbaijan Republic)

  • Zubeyda Imanova

    (Central Bank of Azerbaijan Republic)

  • Hikmat Valirzayev

    (Central Bank of Azerbaijan Republic)

Abstract

This paper examines the role of supply and demand conditions in bank lending using data from the Bank Lending Survey (BLS) in Azerbaijan. Results suggest that both supply and demand factors play an important role in credit growth rate. The estimated impact of softening in credit conditions on the quarter-on-quarter consumer lending growth rate ranges between 0.14 and 0.21 percentage points while the effect of the decrease in demand is found to range between -0.24 and -0.34 percentage points, depending on the specifications. Results remain to be robust to the introduction of various control variables, time dummies, and different specifications. We further compare results for systematically important (SI) banks and others (NSI) and find that the effect is asymmetric for different bank groups.

Suggested Citation

  • Ilkin Huseynov & Zubeyda Imanova & Hikmat Valirzayev, 2021. "Disentangling the effect of supply and demand factors on bank lending. Evidence from Bank Lending Survey in Azerbaijan," Working Papers 2102, Central Bank of Azerbaijan Republic.
    • Handle: RePEc:aze:wpaper:2102
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    JEL classification:

    • E30 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - General (includes Measurement and Data)
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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