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Credit Crunch in Germany?

  • Torsten Schmidt


  • Hiltrud Nehls

This paper evaluates whether the Germany economy is currently affected by a credit crunch, i.e. a supply-side restriction of loans that is not in line with market interest rates and profitability of investment projects.With help of a disequilibrium- model, we calculate a credit supply and a demand-function. We compare estimated demand with estimated supply, finding a considerable excess- demand particularly in the second half of 2002. The main reason for this restriction is the drop in earnings in the banking sector. Applying the model to Großbanken (big banks) and other credit institutions separately, shows that the situation in the former is more severe than in the latter.

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Paper provided by Rheinisch-Westfälisches Institut für Wirtschaftsforschung in its series RWI Discussion Papers with number 0006.

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Length: 23 pages
Date of creation: Sep 2003
Date of revision:
Handle: RePEc:rwi:dpaper:0006
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  1. Stiglitz, Joseph E & Weiss, Andrew, 1981. "Credit Rationing in Markets with Imperfect Information," American Economic Review, American Economic Association, vol. 71(3), pages 393-410, June.
  2. Laffont, Jean-Jacques & Garcia, Rene, 1977. "Disequilibrium Econometrics for Business Loans," Econometrica, Econometric Society, vol. 45(5), pages 1187-1204, July.
  3. Atish R. Ghosh & Swart R. Ghosh, 1999. "East Asia in the Aftermath: Was there a Crunch?," IMF Working Papers 99/38, International Monetary Fund.
  4. Bernanke, Ben & Gertler, Mark, 1995. "Inside the Black Box: The Credit Channel of Monetary Policy Transmission," Working Papers 95-15, C.V. Starr Center for Applied Economics, New York University.
  5. Wei Ding & Domac, Ilker & Ferri, Giovanni, 1998. "Is there a credit crunch in East Asia?," Policy Research Working Paper Series 1959, The World Bank.
  6. Gonzalo, Jesus, 1994. "Five alternative methods of estimating long-run equilibrium relationships," Journal of Econometrics, Elsevier, vol. 60(1-2), pages 203-233.
  7. Bernanke, Ben S, 1995. "The Macroeconomics of the Great Depression: A Comparative Approach," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 27(1), pages 1-28, February.
  8. Sealey, C W, Jr, 1979. "Credit Rationing in the Commercial Loan Market: Estimates of a Structural Model under Conditions of Disequilibrium," Journal of Finance, American Finance Association, vol. 34(3), pages 689-702, June.
  9. Adolfo Barajas & Roberto Steiner, 2002. "Credit Stagnation in Latin America," IMF Working Papers 02/53, International Monetary Fund.
  10. Kugler, Peter, 1987. "Credit rationing and the adjustment of the loan rate: An empirical investigation," Journal of Macroeconomics, Elsevier, vol. 9(4), pages 505-525.
  11. Jaffee, Dwight & Stiglitz, Joseph, 1990. "Credit rationing," Handbook of Monetary Economics, in: B. M. Friedman & F. H. Hahn (ed.), Handbook of Monetary Economics, edition 1, volume 2, chapter 16, pages 837-888 Elsevier.
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