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In Search for a Credit Crunch in Germany

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  • Schmidt, Torsten
  • Zwick, Lina

Abstract

The purpose of this paper is to investigate whether a credit crunch occurred in Germany during the recent financial crisis and to analyze the underlying factors. In order to disentangle credit supply and demand we specify a theory-based dynamic disequilibrium model of the German credit market. To estimate this model we use a new approach based on Bayesian Inference suggested by Bauwens and Lubrano (2007). Besides the analysis of the whole banking sector we will apply the model to five groups of banks (big private banks, Landesbanken, savings banks, credit cooperatives, regional institutions of credit cooperatives) that were affected differently by the financial crisis. The results suggest that a credit crunch did not occur in Germany during the recent economic crisis as well as during the following recovery starting in 2010. Furthermore, we find that especially those banks that were more affected by the financial crisis through huge impairments restricted their credit supply more than others. Both supply and demand side factors contributed to the stabilization of credit financing. This suggests that the structure of the German banking sector as well as economic policy measures avoided a credit crunch.

Suggested Citation

  • Schmidt, Torsten & Zwick, Lina, 2012. "In Search for a Credit Crunch in Germany," Ruhr Economic Papers 361, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.
  • Handle: RePEc:zbw:rwirep:361
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    References listed on IDEAS

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    Cited by:

    1. Enders, Zeno & Peter, Alexandra, 2015. "Global Banking, Trade, and the International Transmission of the Great Recession," Annual Conference 2015 (Muenster): Economic Development - Theory and Policy 113022, Verein für Socialpolitik / German Economic Association.
    2. Bofinger, Peter & Maas, Daniel & Ries, Mathias, 2017. "A model of the market for bank credit: The case of Germany," W.E.P. - Würzburg Economic Papers 98, University of Würzburg, Chair for Monetary Policy and International Economics.

    More about this item

    Keywords

    Credit Crunch; Bank Lending; Financial Crisis;

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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