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How to measure lending policy stance of commercial banks?

Author

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  • Ewa Wróbel

    (Narodowy Bank Polski)

Abstract

Basing on the notion that “true” changes in credit standards set by commercial banks are these which do not result from a variation in the Net Present Value (NPV) of a loan, we suggest a method to verify whether the currently observed lending standards are too tight (soft). In this aim we use (S)VAR models which employ macroeconomic data and information contained in the Senior Loan Officer Opinion Survey. We argue that forecasts of credit standards obtained from these models may be identified with the level of standards congruent with the NPV. If actual credit standards systematically differ from forecasts, they provide a signal of a potential development of a credit cycle.

Suggested Citation

  • Ewa Wróbel, 2019. "How to measure lending policy stance of commercial banks?," NBP Working Papers 317, Narodowy Bank Polski.
    • Handle: RePEc:nbp:nbpmis:317
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    References listed on IDEAS

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    1. Lown, Cara & Morgan, Donald P., 2006. "The Credit Cycle and the Business Cycle: New Findings Using the Loan Officer Opinion Survey," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 38(6), pages 1575-1597, September.
    2. Paligorova, Teodora & Santos, João A.C., 2017. "Monetary policy and bank risk-taking: Evidence from the corporate loan market," Journal of Financial Intermediation, Elsevier, vol. 30(C), pages 35-49.
    3. Giacomo Rodano & Nicolas Serrano-Velarde & Emanuele Tarantino, 2018. "Lending Standards over the Credit Cycle," The Review of Financial Studies, Society for Financial Studies, vol. 31(8), pages 2943-2982.
    4. Raghuram G. Rajan, 2005. "Has financial development made the world riskier?," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, issue Aug, pages 313-369.
    5. Cara S. Lown & Donald P. Morgan, 2002. "Credit effects in the monetary mechanism," Economic Policy Review, Federal Reserve Bank of New York, vol. 8(May), pages 217-235.
    6. Gabriel Jiménez & Enrique Moral-Benito & Raquel Vegas, 2018. "Bank lending standards over the cycle: the role of firms’ productivity and credit risk," Working Papers 1811, Banco de España.
    7. John A. Weinberg, 1995. "Cycles in lending standards?," Economic Quarterly, Federal Reserve Bank of Richmond, issue Sum, pages 1-18.
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    Cited by:

    1. Tomasz Chmielewski & Andrzej Kocięcki & Tomasz Łyziak & Jan Przystupa & Ewa Stanisławska & Małgorzata Walerych & Ewa Wróbel, 2020. "Monetary policy transmission mechanism in Poland What do we know in 2019?," NBP Working Papers 329, Narodowy Bank Polski.

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    Keywords

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    JEL classification:

    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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