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A Credit Market Disequilibrium Model And Periods of Credit Crunch

Author

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  • Ana Maria Čeh

    (The Croatian National Bank, Croatia)

  • Mirna Dumičić

    (The Croatian National Bank, Croatia)

  • Ivo Krznar

Abstract

In this paper, we estimate a credit market disequilibrium model in order to establish specific determinants of credit supply and demand and to identify credit market disequilibrium periods. The model estimation results indicate three characteristic sub-periods, differentiated by sources of bank credit activity dynamics. The first period, from 2000 to 2002, was marked by equilibrium between credit supply and demand and gradual stabilisation of global financial markets and the domestic banking sector after the crisis in the late 1990s. In the second period, from end-2002 to the middle of 2009, encouraged by strong foreign capital inflows, banks were ready to supply more credit than demanded. The third period, marked by an abrupt halt in credit activity, started with an escalation of the world financial crisis during the third quarter of 2008 and lasted until end-2009. According to the model estimation results, such movements were the consequence of a credit supply shortage, i.e. a credit crunch.

Suggested Citation

  • Ana Maria Čeh & Mirna Dumičić & Ivo Krznar, 2011. "A Credit Market Disequilibrium Model And Periods of Credit Crunch," Working Papers 28, The Croatian National Bank, Croatia.
    • Handle: RePEc:hnb:wpaper:28
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    References listed on IDEAS

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    1. repec:zbw:rwidps:0006 is not listed on IDEAS
    2. Mr. David Woo, 1999. "In Search of "Capital Crunch": Supply Factors Behind the Credit Slowdown in Japan," IMF Working Papers 1999/003, International Monetary Fund.
    3. Nehls, Hiltrud & Schmidt, Torsten, 2003. "Credit Crunch in Germany?," RWI Discussion Papers 6, RWI - Leibniz-Institut für Wirtschaftsforschung.
    4. Ceyla Pazarbasioglu, 1996. "A Credit Crunch? a Case Study of Finland in the Aftermath of the Banking Crisis," IMF Working Papers 1996/135, International Monetary Fund.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Shijaku, Gerti & Kalluci, Irini, 2013. "Determinants of bank credit to the private sector: The case of Albania," MPRA Paper 79092, University Library of Munich, Germany.
    2. Petr Korab & Jitka Pomenkova, 2017. "Credit Rationing in Greece During and After the Financial Crisis," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 67(2), pages 119-139, April.
    3. Karmelavičius, Jaunius & Mikaliūnaitė-Jouvanceau, Ieva & Petrokaitė, Austėja Petrokaitė, 2022. "Housing and credit misalignments in a two-market disequilibrium framework," ESRB Working Paper Series 135, European Systemic Risk Board.
    4. Didarul Islam, 2022. "Determinants of Domestic Bank Credit to Private sectors in Bangladesh: An Empirical Investigation," Journal of Economic Impact, Science Impact Publishers, vol. 4(2), pages 65-74.
    5. Rafael Ravnik, 2014. "Short-Term Forecasting of GDP under Structural Changes," Working Papers 40, The Croatian National Bank, Croatia.
    6. Amat Adarov & Richard Grieveson & Mario Holzner & Olga Pindyuk & Hermine Vidovic, 2019. "Unsecured Lending in Central and Southeast Europe," wiiw Market Report 1, The Vienna Institute for International Economic Studies, wiiw.
    7. Mario Bambulovic & Miljana Valdec, 2020. "Testing the characteristics of macroprudential policies’ differential impact on foreign and domestic banks’ lending in Croatia," Public Sector Economics, Institute of Public Finance, vol. 44(2), pages 221-249.
    8. Mirna Dumičić & Igor Ljubaj, 2017. "Delayed Credit Recovery in Croatia:Supply or Demand Driven?," Working Papers 45, The Croatian National Bank, Croatia.
    9. 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

    credit crunch; credit rationing; credit market disequilibrium model;
    All these keywords.

    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • 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

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