Are Bank Credit Standards Affected by the Business Cycle?: Evidence From the Euro Area

18 Pages Posted: 6 Jan 2019

See all articles by Dimitrios Anastasiou

Dimitrios Anastasiou

Alpha Bank; Athens University of Economics and Business, School of Business, Department of Accounting and Finance

Konstantinos Drakos

Athens University of Economics and Business - Department of Accounting and Finance

Stelios Giannoulakis

Athens University of Economics and Business

Date Written: December 21, 2018

Abstract

The purpose of this study is to investigate the link between bank credit standards (CS hereafter) and business cycle fluctuations. This is the first empirical study which attempts to examine whether business cycle affects bank CS. We use quarterly survey-data on CS taken from the Bank Lending Survey from 2003Q1 to 2016Q1, for 14 Euro-area countries. We find that business cycle and GDP growth trend exert a negative influence on CS, and thus business cycle and trend are two major drivers of the tightening or easing of the CS. We also find that the two components (cyclical and trend) of the real GDP decomposition affect in a symmetric way CS. Moreover, symmetry of impacts was found between the CS and the business cycle and trend for large vs. small firms. Our findings could be helpful for both the European bank regulatory authorities and for the banks’ loan officers when they are designing macro-prudential policies.

Keywords: Credit Standards, Business Cycle, Bank Lending Survey, Loan Supply

JEL Classification: E30, E32, E44, G21

Suggested Citation

Anastasiou, Dimitrios and Drakos, Konstantinos and Giannoulakis, Stelios, Are Bank Credit Standards Affected by the Business Cycle?: Evidence From the Euro Area (December 21, 2018). Available at SSRN: https://ssrn.com/abstract=3305357 or http://dx.doi.org/10.2139/ssrn.3305357

Dimitrios Anastasiou (Contact Author)

Alpha Bank ( email )

Athens, 16561
Greece

Athens University of Economics and Business, School of Business, Department of Accounting and Finance ( email )

76 Patission Street
GR-104 34 Athens
Greece

Konstantinos Drakos

Athens University of Economics and Business - Department of Accounting and Finance ( email )

76 Patission Street
GR-104 34 Athens
Greece

Stelios Giannoulakis

Athens University of Economics and Business ( email )

76 Patission Street
GR-10434 Athens
Greece

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