On the Role of a Stock Market in the Bank Loan Market: a Study of France, Germany,and the Euro Area (1)

Robert E. Krainer ()
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Robert E. Krainer: University of Wisconsin Madison

No 1009, Working Papers from University of Urbino Carlo Bo, Department of Economics, Society & Politics - Scientific Committee - L. Stefanini & G. Travaglini

Abstract: In this paper we compare a traditional demand oriented model to a non-traditional capital budgeting model of bank lending based on movements in the equity cost of capital for France, Germany, and the Euro area. Using non-nested hypothesis tests and omitted variables tests, we find that we reject the traditional demand oriented model of bank lending and fail to reject the capital budgeting model of bank lending for Monetary Financial Institutions in France and the Euro area. For Germany the results are inconclusive. Even though Europe is a bank-based financial system, it appears the stock market plays a key role in the lending decisions of banks.

Keywords: Bank Loans; Stock Market; Non-nested Hypothesis Tests. (search for similar items in EconPapers)
JEL-codes: E3 E5 G2 (search for similar items in EconPapers)
Pages: 38 pages
Date: 2010, Revised 2010
New Economics Papers: this item is included in nep-ban, nep-bec, nep-eec and nep-mac
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http://www.econ.uniurb.it/RePEc/urb/wpaper/WP_10_09.pdf First version, 2010 (application/pdf)

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Persistent link: https://EconPapers.repec.org/RePEc:urb:wpaper:10_09

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