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Credit Market Disequilibrium in Poland : Can We Find What We Expect ? Non-Stationarity and the"Min" Condition

  • Hurlin, Christophe
  • Kierzenkowski, Rafal

This paper presents an empirical investigation of the disequilibrium hypothesis on the Polish loan market in the 1990s. Using data over this period of deep transition, we estimate a disequilibrium model with a standard maximum likelihood method. However, the estimates are highly counter-intuitive as regards the timing of the identified regimes. We show that the gap between the econometric evidence and the expected results may stem from the issue of stochastic non-stationarity in a disequilibrium setting based on the “min” condition. We find that the omission of one non-stationary variable of the cointegrating space or the absence of a “structural” cointegrating relationship in one or both regimes lead to a spurious configuration. In such a case, using, wrongly, the standard likelihood function, derived under the hypothesis of stationarity, may lead to non-convergent estimates of structural parameters and, as a consequence, to a fallacious regimes identification. Therefore, as the first approach to this issue, we estimate a disequilibrium model with stationary data. The empirical results are then robust and economically founded and correspond to the set and the timing of anticipated regimes.

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Paper provided by Paris Dauphine University in its series Economics Papers from University Paris Dauphine with number 123456789/3410.

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Date of creation: Jun 2003
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Handle: RePEc:dau:papers:123456789/3410
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  1. Ceyla PazarbaÅŸioÄŸlu, 1997. "A Credit Crunch? Finland in the Aftermath of the Banking Crisis," IMF Staff Papers, Palgrave Macmillan, vol. 44(3), pages 315-327, September.
  2. Kim, Hyun E., 1999. "Was the credit channel a key monetary transmission mechanism following the recent financial crisis in the Republic of Korea?," Policy Research Working Paper Series 2103, The World Bank.
  3. Gertler, Mark & Gilchrist, Simon, 1993. " The Role of Credit Market Imperfections in the Monetary Transmission Mechanism: Arguments and Evidence," Scandinavian Journal of Economics, Wiley Blackwell, vol. 95(1), pages 43-64.
  4. Sealey, C W, Jr, 1979. "Credit Rationing in the Commercial Loan Market: Estimates of a Structural Model under Conditions of Disequilibrium," Journal of Finance, American Finance Association, vol. 34(3), pages 689-702, June.
  5. Fair, Ray C & Jaffee, Dwight M, 1972. "Methods of Estimation for Markets in Disequilibrium," Econometrica, Econometric Society, vol. 40(3), pages 497-514, May.
  6. Ben S. Bernanke & Alan S. Blinder, 1988. "Credit, Money, and Aggregate Demand," NBER Working Papers 2534, National Bureau of Economic Research, Inc.
  7. Maddala, G S & Nelson, Forrest D, 1974. "Maximum Likelihood Methods for Models of Markets in Disequilibrium," Econometrica, Econometric Society, vol. 42(6), pages 1013-30, November.
  8. Dale, Spencer & Haldane, Andrew G., 1995. "Interest rates and the channels of monetary transmission: Some sectoral estimates," European Economic Review, Elsevier, vol. 39(9), pages 1611-1626, December.
  9. Perez, Stephen J., 1998. "Testing for Credit Rationing: An Application of Disequilibrium Econometrics," Journal of Macroeconomics, Elsevier, vol. 20(4), pages 721-739, October.
  10. International Monetary Fund, 2002. "Republic Of Poland: Statistical Appendix," IMF Staff Country Reports 02/128, International Monetary Fund.
  11. Laroque, Guy & Salanie, Bernard, 1997. "Normal estimators for cointegrating relationships," Economics Letters, Elsevier, vol. 55(2), pages 185-189, August.
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