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Bank lending in Switzerland: Capturing cross-sectional heterogeneity and asymmetry over time

Author

Listed:
  • Dr. Toni Beutler
  • Dr. Matthias Gubler
  • Simona Hauri
  • Sylvia Kaufmann

Abstract

We study the bank lending channel in Switzerland over three decades using unbalanced quarterly bank-individual data spanning 1987 to 2016. In contrast to the usual empirical approach, we take an agnostic stance on which bank characteristic drives the heterogenous lending response to interest rate changes. In addition, our empirical model allows for a changing lending reaction occurring over time in a state-dependent manner. Our results are consistent with the existence of a bank lending channel, which is however muted in specific periods. Such episodes are characterized by increased economic uncertainty, which negatively impacts loan growth.

Suggested Citation

  • Dr. Toni Beutler & Dr. Matthias Gubler & Simona Hauri & Sylvia Kaufmann, 2020. "Bank lending in Switzerland: Capturing cross-sectional heterogeneity and asymmetry over time," Working Papers 2020-12, Swiss National Bank.
    • Handle: RePEc:snb:snbwpa:2020-12
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    More about this item

    Keywords

    Bank lending channel; economic uncertainty; Markov switching model; Bayesian econometrics; unbalanced panels;
    All these keywords.

    JEL classification:

    • C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Bayesian Analysis: General
    • C34 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Truncated and Censored Models; Switching Regression Models
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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