Modelling Loans to Non-Financial Corporations in the Euro Area

48 Pages Posted: 30 Mar 2012

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: February 23, 2012

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 using 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 non-financial corporations.

Keywords: loans to non-financial corporations, credit

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 (February 23, 2012). Bank of Italy Temi di Discussione (Working Paper) No. 857. Available at SSRN: https://ssrn.com/abstract=2030839 or http://dx.doi.org/10.2139/ssrn.2030839

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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