Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/22454
Authors: 
Frömmel, Michael
Schmidt, Torsten
Year of Publication: 
2006
Series/Report no.: 
Diskussionspapiere des Fachbereichs Wirtschaftswissenschaften, Universität Hannover 342
Abstract: 
We examine the dynamics of bank lending to the private sector for countries of the Euro area by applying a Markov switching error correction model. We identify for Belgium, Germany, Ireland and Portugal stable, mean reverting regimes and unstable regimes with no tendency to return to the long term credit demand equation, whereas for some other countries there is only weak evidence. Furthermore, for these as well as for other countries we detect in the less stable regimes a strong comovement with the development of the stock market. We interpret this as evidence for constraints in bank lending. In contrast, the banks? capital seems to have only marginal impact on the lending behaviour.
Subjects: 
Bank lending
credit demand
Euro area
Markov switching error correction
credit channel
asset prices
credit rationing
JEL: 
G21
C32
Document Type: 
Working Paper

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