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Domestic Credit in Times of Supervision: An Empirical Investigation of European Countries

Author

Listed:
  • Thomas Jobert

    (University of Nice Sophia Antipolis, France
    GREDEG CNRS)

  • Alexandru Monahov

    (University of Nice Sophia Antipolis, France
    GREDEG CNRS)

  • Anna Tykhonenko

    (University of Nice Sophia Antipolis, France
    GREDEG CNRS)

Abstract

We study the impact of prudential supervision on domestic credit in 27 countries throughout 1999-2012. We use the Empirical Iterative Bayes’ estimator to account for country heterogeneity. We find: (i) the interest rate not to be a fundamental variable in explaining domestic credit, (ii) negative relations between credit sensitivity to past investment and to financial dependence, (iii) the effects of supervision on credit differ by country, but (iv) without systematic negative impact of increased supervisory stringency. Our results are coherent with two interpretations: one encouraging regulatory set-ups where increased supervision positively affects credit, and another cautioning about the associated risks.

Suggested Citation

  • Thomas Jobert & Alexandru Monahov & Anna Tykhonenko, 2014. "Domestic Credit in Times of Supervision: An Empirical Investigation of European Countries," GREDEG Working Papers 2014-30, Groupe de REcherche en Droit, Economie, Gestion (GREDEG CNRS), University of Nice Sophia Antipolis.
  • Handle: RePEc:gre:wpaper:2014-30
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    References listed on IDEAS

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    Keywords

    Prudential supervision; Supervision in the EU; Banking system supervision; Financial institution regulation; Bayesian shrinkage estimator;

    JEL classification:

    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • E65 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Studies of Particular Policy Episodes
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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