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Modelling loans to non-financial corporations in the euro area

  • Kok, Christoffer
  • Marqués-Ibáñez, David
  • Rossi, Carlotta

We model the determinants of loans to non-financial corporations in the euro area. Using the Johansen (1992) methodology, we identify three cointegrating relationships. These relationships are interpreted as the long-run loan demand, investment and loan supply equations. The short-run dynamics of loan demand for the euro area are subsequently modelled by means of a Vector Error Correction Model (VECM). We perform a number of specification tests, which suggest that developments in loans to non-financial corporations in the euro area can be reasonably explained by the model. We then use the estimated model to analyse the impact of permanent and temporary shocks to the policy rate on bank lending to nonfinancial corporations. JEL Classification: C32, C51

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Paper provided by European Central Bank in its series Working Paper Series with number 0989.

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Date of creation: Jan 2009
Date of revision:
Handle: RePEc:ecb:ecbwps:20090989
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  1. A. Calza & C. Gartner & J. Sousa, 2003. "Modelling the demand for loans to the private sector in the euro area," Applied Economics, Taylor & Francis Journals, vol. 35(1), pages 107-117.
  2. Calza, Alessandro & Manrique, Marta & Sousa, Joao, 2006. "Credit in the euro area: An empirical investigation using aggregate data," The Quarterly Review of Economics and Finance, Elsevier, vol. 46(2), pages 211-226, May.
  3. Gomes, Sandra & Jacquinot, Pascal & Mohr, Matthias & Pisani, Massimiliano, 2011. "Structural reforms and macroeconomic performance in the euro area countries: a model-based assessment," Working Paper Series 1323, European Central Bank.
  4. Andrew Brigden & Paul Mizen, 2004. "Interactions between Money, Lending and Investment in the UK Private Non-Financial Corporate Sector," Manchester School, University of Manchester, vol. 72(1), pages 72-99, 01.
  5. Ignazio Angeloni & Michael Ehrmann, 2003. "Monetary transmission in the euro area: early evidence," Economic Policy, CEPR;CES;MSH, vol. 18(37), pages 469-501, October.
  6. Jiminez, G. & Ongena, S. & Saurina, J., 2007. "Hazardous Times for Monetary Policy : What do Twenty-three Million Bank Loans Say about the Effects of Monetary Policy on Credit Risk?," Discussion Paper 2007-75, Tilburg University, Center for Economic Research.
  7. Hülsewig, Oliver & Mayer, Eric & Wollmershäuser, Timo, 2006. "Bank loan supply and monetary policy transmission in Germany: An assessment based on matching impulse responses," Munich Reprints in Economics 19432, University of Munich, Department of Economics.
  8. Bernanke, Ben & Gertler, Mark, 1995. "Inside the Black Box: The Credit Channel of Monetary Policy Transmission," Working Papers 95-15, C.V. Starr Center for Applied Economics, New York University.
  9. Gambacorta, Leonardo & Mistrulli, Paolo Emilio, 2004. "Does bank capital affect lending behavior?," Journal of Financial Intermediation, Elsevier, vol. 13(4), pages 436-457, October.
  10. Ehrmann, Michael & Gambacorta, Leonardo & Martinéz Pagés, Jorge & Sevestre, Patrick & Worms, Andreas, 2001. "Financial systems and the role of banks in monetary policy transmission in the euro area," Working Paper Series 0105, European Central Bank.
  11. Johansen, Soren, 1992. "Cointegration in partial systems and the efficiency of single-equation analysis," Journal of Econometrics, Elsevier, vol. 52(3), pages 389-402, June.
  12. Boris Hofmann, 2001. "The determinants of private sector credit in industrialised countries: do property prices matter?," BIS Working Papers 108, Bank for International Settlements.
  13. Philip Lowe & Claudio Borio, 2002. "Asset prices, financial and monetary stability: exploring the nexus," BIS Working Papers 114, Bank for International Settlements.
  14. Andrew Brigden & Paul Mizen, 1999. "Money, credit and investment in UK corporate sector," Bank of England working papers 100, Bank of England.
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