On the Role of a Stock Market in the Bank Loan Market: a Study of France, Germany,and the Euro Area (1)
In this paper we compare a traditional demand oriented model to a non-traditional capital budgeting model of bank lending based on movements in the equity cost of capital for France, Germany, and the Euro area. Using non-nested hypothesis tests and omitted variables tests, we find that we reject the traditional demand oriented model of bank lending and fail to reject the capital budgeting model of bank lending for Monetary Financial Institutions in France and the Euro area. For Germany the results are inconclusive. Even though Europe is a bank-based financial system, it appears the stock market plays a key role in the lending decisions of banks.
|Date of creation:||2010|
|Date of revision:||2010|
|Contact details of provider:|| Web page: http://www.econ.uniurb.it/|
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