Loan Supply in Germany During the Financial Crisis

40 Pages Posted: 8 Jun 2016

See all articles by Ulrike Busch

Ulrike Busch

Deutsche Bundesbank

Michael Scharnagl

Deutsche Bundesbank

Jan Scheithauer

Deutsche Bundesbank - Economics Department

Date Written: 2010

Abstract

Distinguishing pure supply effects from other determinants of price and quantity in the market for loans is a notoriously difficult problem. Using German data, we employ Bayesian vector autoregressive models with sign restrictions on the impulse response functions in order to enquire the role of loan supply and monetary policy shocks for the dynamics of loans to non-financial corporations. For the three quarters following the Lehman collapse, we find very strong negative loan supply shocks, while monetary policy was essentially neutral. Nevertheless, the historical decomposition shows a cumulated negative impact of loan supply shocks and monetary policy shocks on loans to non-financial corporations, due to the lagged effects of past loan supply and monetary policy shocks. However, these negative effects on loans to non-financial corporations are overcompensated by positive other shocks, which implies that loans developed more favorably than implied by the model, over the past few quarters.

Keywords: Loan supply, Bayesian VAR, sign restrictions

JEL Classification: C11, C32, E51

Suggested Citation

Busch, Ulrike and Scharnagl, Michael and Scheithauer, Jan, Loan Supply in Germany During the Financial Crisis (2010). Bundesbank Series 1 Discussion Paper No. 2010,05, Available at SSRN: https://ssrn.com/abstract=2785370 or http://dx.doi.org/10.2139/ssrn.2785370

Ulrike Busch (Contact Author)

Deutsche Bundesbank ( email )

Wilhelm-Epstein-Strasse 14
60431 Frankfurt am Main
Germany

Michael Scharnagl

Deutsche Bundesbank ( email )

Wilhelm-Epstein-Str. 14
Frankfurt/Main, 60431
Germany

Jan Scheithauer

Deutsche Bundesbank - Economics Department ( email )

Wilhelm-Epstein-Strasse 14
60431 Frankfurt am Main
Germany

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