Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/264677 
Year of Publication: 
2003
Series/Report no.: 
Working Paper No. 85
Publisher: 
Oesterreichische Nationalbank (OeNB), Vienna
Abstract: 
In the present paper we use a balanced bank panel data set to obtain an inference on two dimensions of the asymmetric response of bank lending to interest rate changes. The cross-sectional dimension is captured by group-specific parameters whereby each bank's group membership is estimated along with the model parameters. Moreover, the asymmetric response over time is modelled with switching parameters that depend on a latent state variable. The presence of two latent indicators calls for Bayesian simulation methods. The results show that three bank groups, characterized by the groups' average asset total, differ in their lending reaction to interest rate changes. Some sensitivity analysis comparing the results for different group specifications and the models' out-of-sample forecasting performance confirms our model specification.
Subjects: 
Bank lending
clustering
forecasting
Markov switching
Markov chain Monte Carlo
panel data
JEL: 
C11
C15
E44
E51
Document Type: 
Working Paper

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