Bank lending in a cointegrated VAR model
This paper aims at identifying the link between financial markets and the real sector of the economy. Following the literature on the topic, we select a small set of variables representing the principal financial and real dynamics observed for the Italian economy. As a first result, we find cointegration among the chosen set of variables. Thus we specify and estimate a Vector Error Correction Model which captures both the long-run and the short-term dynamics of the multivariate system. The main innovation of this work lies in investigating the link between lending and growth at a monthly frequency. Moreover, we allow the model to include a structural break due to the latest economic and financial crisis. The model obtained represents an innovative forecasting tool for improving the knowledge, nowcasting and shortterm forecasting of the business cycle by exploiting shocks originating from the lending market that propagate to the real economy.
|Date of creation:||Sep 2013|
|Date of revision:|
|Contact details of provider:|| Web page: http://www.dt.tesoro.it|
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