Bank Lending in a Cointegrated VAR Model

Government of the Italian Republic (Italy), Ministry of Economy and Finance, Department of the Treasury Working Paper No. 8

31 Pages Posted: 3 Oct 2013

See all articles by Filippo Maria Pericoli

Filippo Maria Pericoli

Italian Ministry of Economy and Finance

Roberto Galli

Ministry of Economy and Finance, Italy

Cecilia Frale

Government of the Italian Republic (Italy) - Department of the Treasury

Stefania Pozzuoli

Ministry of Economy and Finance, Italy

Date Written: September 20, 2013

Abstract

This paper aims at identifying the link between financial markets and the real sector of the economy. Following the literature on the topic, we select a small set of variables representing the principal financial and real dynamics observed for the Italian economy. As a first result, we find cointegration among the chosen set of variables. Thus we specify and estimate a Vector Error Correction Model which captures both the long-run and the short-term dynamics of the multivariate system. The main innovation of this work lies in investigating the link between lending and growth at a monthly frequency. Moreover, we allow the model to include a structural break due to the latest economic and financial crisis. The model obtained represents an innovative forecasting tool for improving the knowledge, now casting and short-term forecasting of the business cycle by exploiting shocks originating from the lending market that propagate to the real economy.

Keywords: Bank Lending, Forecast, Cointegrated VAR

JEL Classification: C53, E47, E51

Suggested Citation

Pericoli, Filippo Maria and Galli, Roberto and Frale, Cecilia and Pozzuoli, Stefania, Bank Lending in a Cointegrated VAR Model (September 20, 2013). Government of the Italian Republic (Italy), Ministry of Economy and Finance, Department of the Treasury Working Paper No. 8, Available at SSRN: https://ssrn.com/abstract=2334707

Filippo Maria Pericoli (Contact Author)

Italian Ministry of Economy and Finance ( email )

Via XX Settembre, 97
Rome
Italy
+39-3286150203 (Phone)

Roberto Galli

Ministry of Economy and Finance, Italy ( email )

Italy

Cecilia Frale

Government of the Italian Republic (Italy) - Department of the Treasury ( email )

Via XX Settembre, 87
Rome, 00197
Italy

Stefania Pozzuoli

Ministry of Economy and Finance, Italy ( email )

Via XX Settembre 97
Rome, Rome 00187
Italy

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
28
Abstract Views
687
PlumX Metrics