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Bank Lending Procyclicality and Credit Quality during Financial Crises

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  • Guglielmo Maria Caporale
  • Stefano Di Colli
  • Juan Sergio Lopez

Abstract

This paper analyses macroeconomic and financial determinants of bad loans applying a SVAR approach to investigate whether excessive loans granted during expansionary phases can explain the more than proportional increase in non-performing loans during contractionary periods. The results indicate that the effects of a permanent shock to bad loans on the excess of credit are significant and persistent for bad loans to firms, but not for bad loans to households or in the case of Cooperative Credit Banks, who adopt more efficient lending policies.

Suggested Citation

  • Guglielmo Maria Caporale & Stefano Di Colli & Juan Sergio Lopez, 2013. "Bank Lending Procyclicality and Credit Quality during Financial Crises," Discussion Papers of DIW Berlin 1309, DIW Berlin, German Institute for Economic Research.
  • Handle: RePEc:diw:diwwpp:dp1309
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    References listed on IDEAS

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    1. repec:eee:finsta:v:31:y:2017:i:c:p:107-118 is not listed on IDEAS
    2. Guglielmo Maria Caporale & Matteo Alessi & Stefano Di Colli & Juan Sergio Lopez, 2015. "Loan Loss Provision: Some Empirical Evidence for Italian Banks," Discussion Papers of DIW Berlin 1459, DIW Berlin, German Institute for Economic Research.
    3. repec:psc:journl:v:9:y:2017:i:4:p:323-357 is not listed on IDEAS
    4. Pallavi Chavan & Leonardo Gambacorta, 2016. "Bank Lending and Loan Quality: The Case of India," Working Papers id:11521, eSocialSciences.
    5. ROMAN Angela & BILAN Irina, 2015. "An Empirical Analysis Of The Macroeconomic Determinants Of Non-Performing Loans In Eu28 Banking Sector," Revista Economica, Lucian Blaga University of Sibiu, Faculty of Economic Sciences, vol. 67(2), pages 108-127.

    More about this item

    Keywords

    loan losses; macroeconomic determinants; Italian banking system; SVAR;

    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • G1 - Financial Economics - - General Financial Markets
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes

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