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Bank Ownership and Credit over the Business Cycle : Is Lending by State Banks Less Procyclical?

Listed author(s):
  • Bertay, A.C.

    (Tilburg University, Center For Economic Research)

  • Demirgüc-Kunt, A.
  • Huizinga, H.P.

    (Tilburg University, Center For Economic Research)

Abstract: This paper finds that lending by state banks is less procyclical than lending by private banks, especially in countries with good governance. Lending by state banks in high income countries is even countercyclical. On the liability side, state banks expand potentially unstable non-deposit liabilities relatively little during booms, especially in countries with good governance. Public banks also report loan non-performance more evenly over the business cycle. Overall our results suggest that state banks can play a useful role in stabilizing credit over the business cycle as well as during periods of financial instability. However, the track record of state banks in credit allocation remains quite poor, questioning the wisdom of using state banks as a short term counter-cyclical tool.

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File URL: https://pure.uvt.nl/portal/files/1435467/2012-049.pdf
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Paper provided by Tilburg University, Center for Economic Research in its series Discussion Paper with number 2012-049.

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Date of creation: 2012
Handle: RePEc:tiu:tiucen:40f564a9-123d-454e-beb5-a161e1910742
Contact details of provider: Web page: http://center.uvt.nl

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