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Identification of a Loan Supply Function: A Cross-Country Test for the Existence of a Bank Lending Channel

Author

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  • Sophocles N. Brissimis

    (Bank of Greece and University of Piraeus)

  • Matthaios D. Delis

    (Athens University of Economics and Business)

Abstract

Using the theoretical predictions of the Bernanke-Blinder (1988) model, we seek to examine the existence of a bank lending channel through the empirical identification of a loan supply function and to assess the impact of differential bank characteristics on banks’ ability to supply loans. To this end, we estimate a loan supply model and test for the restrictions implied by perfect substitutability between loans and bonds in bank portfolios. Estimations are carried out on bank panel data for 16 OECD countries, the results showing that a bank lending channel is at work in only two of them. Moreover, and contrary to standard accounts, we find that the relevance of bank characteristics is hardly a decisive factor in the identification of a loan supply function.

Suggested Citation

  • Sophocles N. Brissimis & Matthaios D. Delis, 2007. "Identification of a Loan Supply Function: A Cross-Country Test for the Existence of a Bank Lending Channel," Working Papers 54, Bank of Greece.
    • Handle: RePEc:bog:wpaper:54
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    More about this item

    Keywords

    Bank lending channel; financial structure; dynamic panels;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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