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What determines the size of bank loans in industrialized countries? The role of government debt

  • Riccardo De Bonis

    ()

    (Bank of Italy)

  • Massimiliano Stacchini

    ()

    (Bank of Italy)

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.

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Paper provided by Bank of Italy, Economic Research and International Relations Area in its series Temi di discussione (Economic working papers) with number 707.

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Date of creation: Mar 2009
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Handle: RePEc:bdi:wptemi:td_707_09
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