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Credit market disequilibrium in Greece (2003-2011) - a Bayesian approach

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  • Vouldis, Angelos

Abstract

Motivated by the linkage between credit and growth in the Greek economy, and the deceleration of credit since the financial crisis, this paper studies the evolution of credit demand and supply in Greece. A disequilibrium model of demand and supply is estimated spanning the period 2003M1-2011M3. The adopted specification allows for stochastic shocks on both supply and demand. A Bayesian estimation methodology with data augmentation for the latent variables is used. The analysis is carried out separately for each type of loan (short- and long-term business loans, consumer loans and mortgages) enabling the comparative study of the credit rationing and supply constraint effects among loan categories. The results indicate that, for all loan categories, excess demand characterized the boom period. After the intensification of the debt crisis, evidence is provided for the existence of excess demand due to binding constraints on supply. However, demand for short-term business loans has slowed down more than supply, reflecting businesses JEL Classification: D50, E44, E42, C32, G21, G28, P00

Suggested Citation

  • Vouldis, Angelos, 2015. "Credit market disequilibrium in Greece (2003-2011) - a Bayesian approach," Working Paper Series 1805, European Central Bank.
    • Handle: RePEc:ecb:ecbwps:20151805
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    Cited by:

    1. Dimitrios P. Louzis & Angelos T. Vouldis, 2015. "Profitability in the Greek Banking System: a Dual Investigation of Net Interest and Non-Interest Income," Working Papers 191, Bank of Greece.
    2. Angelos T. Vouldis & Dimitrios P. Louzis, 2018. "Leading indicators of non-performing loans in Greece: the information content of macro-, micro- and bank-specific variables," Empirical Economics, Springer, vol. 54(3), pages 1187-1214, May.
    3. Bofinger, Peter & Maas, Daniel & Ries, Mathias, 2017. "A model of the market for bank credit: The case of Germany," W.E.P. - Würzburg Economic Papers 98, University of Würzburg, Department of Economics.
    4. Tamini, Arnaud & Petey, Joël, 2021. "Hoarding of reserves in the banking industry: Explaining the African paradox," The Quarterly Review of Economics and Finance, Elsevier, vol. 81(C), pages 214-225.

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    More about this item

    Keywords

    Bayesian methods; Credit disequilibrium; Greek credit market; Leading indicators; Stress Test;
    All these keywords.

    JEL classification:

    • D50 - Microeconomics - - General Equilibrium and Disequilibrium - - - General
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • P00 - Political Economy and Comparative Economic Systems - - General - - - General

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