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Is There a Credit Crunch in the Czech Republic?

Author

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  • Lucie Reznakova

    (Department of Finance, Faculty of Business and Economics, Mendel University in Brno)

  • Svatopluk Kapounek

    (Department of Finance, Faculty of Business and Economics, Mendel University in Brno)

Abstract

We apply a disequilibrium model of credit demand and supply to test the credit crunch hy- pothesis. We suppose that firms face credit rationing and a realised outstanding loan will be the minimum desired level of commercial bank loans and bank limit for the firm. We adopted the disequilibrium model which consists of credit supply and credit demand equations. We sug- gest that actual observed credit growth rate at time t lies on the supply curve (excess demand), or on the demand curve (excess supply), or on both (equilibrium). Our model is estimated by the full-information maximum likelihood approach with a numerical maximization of the like- lihood function. Our basic findings show that significant decrease in credits after the financial crisis in the year 2007 was caused by low economic and investment activity and reject the hy- pothesis that there is a credit crunch in the Czech Republic.

Suggested Citation

  • Lucie Reznakova & Svatopluk Kapounek, 2014. "Is There a Credit Crunch in the Czech Republic?," MENDELU Working Papers in Business and Economics 2014-50, Mendel University in Brno, Faculty of Business and Economics.
    • Handle: RePEc:men:wpaper:50_2014
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    1. 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, Department of Economics.

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    More about this item

    Keywords

    money supply; money demand; maximum likelihood approach; credit; financial crisis; credit crunch; disequilibrium;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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