The Level Effect of Bank Lending Standards on Business Lending

32 Pages Posted: 16 Oct 2013

See all articles by Koen van der Veer

Koen van der Veer

De Nederlandsche Bank

Marco Hoeberichts

De Nederlandsche Bank - Research Department

Date Written: October 15, 2013

Abstract

Do tightenings of bank lending standards permanently reduce bank lending? We construct a measure of a bank’s level of lending standards using micro-data from the sample of banks participating in the Eurosystem Bank Lending Survey in The Netherlands and show that this level measure affects business lending. The level effect is statistically robust and economically relevant; a one point tightening reduces a bank’s quarterly growth rate of business lending by about half a percentage point until bank lending standards are eased. This level effect of bank lending standards helps to explain low bank lending growth after a period of prolonged tightening as well as high bank lending growth in a period of prolonged easing. As such, the analysis provides another potential indicator for macroprudential policy.

Keywords: bank lending standards, bank lending survey, bank lending, level effect, macroprudential policy

JEL Classification: E44, E51, G01, G21

Suggested Citation

van der Veer, Koen and Hoeberichts, Marco M., The Level Effect of Bank Lending Standards on Business Lending (October 15, 2013). De Nederlandsche Bank Working Paper No. 396. Available at SSRN: https://ssrn.com/abstract=2340483 or http://dx.doi.org/10.2139/ssrn.2340483

Koen van der Veer (Contact Author)

De Nederlandsche Bank ( email )

PO Box 98
1000 AB Amsterdam
Amsterdam, 1000 AB
Netherlands

Marco M. Hoeberichts

De Nederlandsche Bank - Research Department ( email )

P.O. Box 98
1000 AB Amsterdam
Netherlands
+31-20-524 2890 (Phone)
+31-20-524 2529 (Fax)

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