Modelling Loans to Non-Financial Corporations in the Euro Area

47 Pages Posted: 2 Feb 2009

See all articles by Christoffer Kok

Christoffer Kok

European Central Bank (ECB)

David Marques-Ibanez

European Central Bank (ECB)

Carlotta Rossi

Bank of Italy

Multiple version iconThere are 3 versions of this paper

Date Written: January 7, 2009

Abstract

We model the determinants of loans to non-financial corporations in the euro area. Using the Johansen (1992) methodology, we identify three cointegrating relationships. These relationships are interpreted as the long-run loan demand, investment and loan supply equations. The short-run dynamics of loan demand for the euro area are subsequently modelled by means of a Vector Error Correction Model (VECM). We perform a number of specification tests, which suggest that developments in loans to non-financial corporations in the euro area can be reasonably explained by the model. We then use the estimated model to analyse the impact of permanent and temporary shocks to the policy rate on bank lending to nonfinancial corporations.

Keywords: bank credit, euro area, non-financial corporations, cointegration, error-correction model

JEL Classification: C32, C51

Suggested Citation

Kok, Christoffer and Marques-Ibanez, David and Rossi, Carlotta, Modelling Loans to Non-Financial Corporations in the Euro Area (January 7, 2009). ECB Working Paper No. 989. Available at SSRN: https://ssrn.com/abstract=1310649

Christoffer Kok

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

David Marques-Ibanez

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany
49 6913 44 6460 (Phone)
49 6913 44 6460 (Fax)

Carlotta Rossi (Contact Author)

Bank of Italy ( email )

Via Nazionale 91
Rome, 00184
Italy

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