Advanced search

Bank Lending and Asset Prices in the Euro Area

Author
Organization
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 co-movement 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.
Keywords
asset prices, credit channel, credit demand, credit rationing

Citation

Please use this url to cite or link to this publication:

Chicago
Frömmel, Michael, and Torsten Schmidt. 2006. “Bank Lending and Asset Prices in the Euro Area.” RWI Discussion Papers. Essen, Germany: Rheinisch-Westfälisches Institut für Wirtschaftsforschung.
APA
Frömmel, M., & Schmidt, T. (2006). Bank Lending and Asset Prices in the Euro Area. RWI Discussion Papers. Essen, Germany: Rheinisch-Westfälisches Institut für Wirtschaftsforschung.
Vancouver
1.
Frömmel M, Schmidt T. Bank Lending and Asset Prices in the Euro Area. RWI Discussion Papers. Essen, Germany: Rheinisch-Westfälisches Institut für Wirtschaftsforschung; 2006.
MLA
Frömmel, Michael, and Torsten Schmidt. “Bank Lending and Asset Prices in the Euro Area.” RWI Discussion Papers 2006 : n. pag. Print.
@misc{718634,
  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 co-movement 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.},
  author       = {Frömmel, Michael and Schmidt, Torsten},
  isbn         = {3-936454-66-3},
  issn         = {1612-3565},
  keywords     = {asset prices,credit channel,credit demand,credit rationing},
  language     = {eng},
  number       = {42},
  pages        = {22},
  publisher    = {Rheinisch-Westfälisches Institut für Wirtschaftsforschung},
  series       = {RWI Discussion Papers},
  title        = {Bank Lending and Asset Prices in the Euro Area},
  url          = {http://www.rwi-essen.de/},
  year         = {2006},
}