Weather Conditions and Bank Loans Efficiency in US Banking: A Panel VAR Approach
47 Pages Posted: 10 Sep 2011
Date Written: July 10, 2011
An issue that has not been dealt in the literature refers to the relationship between bank loan efficiency and weather conditions. This paper provides empirical evidence, for the first time, that sheds new light into the dynamic interactions between weather and bank loan efficiency, using a panel data set that includes 69 banks operating in the US spanning the period 1999 to 2009. Bank loan inefficiency is derived using a stochastic frontier production approach. We also estimate productive inefficiency using a directional technology distance function framework. Then, we employ a Panel-VAR model to derive orthogonalised impulse response functions and variance decompositions, which show responses of the main variables, weather and bank loan inefficiency, to orthogonal shocks.
Keywords: Bank loan efficiency, weather, panel VAR, causality
JEL Classification: G21, G28, D21
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