Assymetries in Bank Lending Behavior: Austria During the 1990s

45 Pages Posted: 26 Feb 2003

See all articles by Sylvia Kaufmann

Sylvia Kaufmann

Oesterreichische Nationalbank - Economic Studies Division; University of Basel - WWZ

Date Written: December 2001

Abstract

This paper investigates both cross-sectional asymmetry (related to bank-specific characteristics like size and liquidity) and asymmetries overtime (potentially related to the overall state of the economy) in Austrian bank lending reaction to monetary policy. The first type of asymmetry is accounted for by including interaction terms, and the second type is captured by latent state-dependent parameters. Estimation is cast into a Bayesian framework, and the posterior inference is obtained using Markov chain Monte Carlo simulation methods. The results document a significant asymmetric effect of interest rate changes over time on bank lending. During economic recovery, lagged interest rate changes have no significant effect on lending. Where the effects are significant, liquidity emerges as the bank characteristic that determines cross-sectional asymmetry.

Keywords: Asymmetry, bank lending, Markov switching, Markov chain Monte Carlo

JEL Classification: C11, C23, E51

Suggested Citation

Kaufmann, Sylvia, Assymetries in Bank Lending Behavior: Austria During the 1990s (December 2001). Available at SSRN: https://ssrn.com/abstract=356304 or http://dx.doi.org/10.2139/ssrn.356304

Sylvia Kaufmann (Contact Author)

Oesterreichische Nationalbank - Economic Studies Division ( email )

Otto Wagner-Platz 3
P.O. Box 61
Vienna, 1011
Austria
+43 1 40420-7221 (Phone)

University of Basel - WWZ ( email )

Basel, 4002
Switzerland

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