Modelling the Demand for Loans to the Private Sector in the Euro Area

34 Pages Posted: 19 Feb 2003

See all articles by Alessandro Calza

Alessandro Calza

European Central Bank (ECB)

Christine Gartner

European Central Bank (ECB)

João Sousa

European Central Bank (ECB)

Date Written: April 2001

Abstract

This paper studies the determinants of loans to the private sector in the euro area. Using the Johansen methodology, the study identifies one cointegrating relationship linking real loans, GDP and interest rates. This relationship implies that in the long-run real loans are positively related to real GDP and negatively to real short-term and long-term interest rates. Both the signs and the magnitude of the coefficients suggest that the cointegrating vector describes a long-run demand equation. The short-run dynamics of the demand for euro area real loans is subsequently modelled by means of a Vector Error Correction Model (VECM). A number of specification tests performed on the VECM produced satisfactory results, with tests of stability of the model's parameters showing no signs of structural breaks during the sample period (1980 Q1 - 1999 Q2). All of this suggests that developments in real loans to the private sector in the euro area can be reasonably explained by the model.

Keywords: credit demand, euro area, cointegration, error-correction model

JEL Classification: C32, C51

Suggested Citation

Calza, Alessandro and Gartner, Christine and Soucasaux Meneses e Sousa, João Miguel, Modelling the Demand for Loans to the Private Sector in the Euro Area (April 2001). Available at SSRN: https://ssrn.com/abstract=356045 or http://dx.doi.org/10.2139/ssrn.356045

Alessandro Calza (Contact Author)

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany
0049 69 13440 (Phone)
0044 69 1344 6000 (Fax)

Christine Gartner

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

João Miguel Soucasaux Meneses e Sousa

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

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

Paper statistics

Downloads
258
Abstract Views
3,013
rank
162,260
PlumX Metrics