 Bank Lending Standards, Loan Demand, and the Macroeconomy: Evidence from the Emerging Market Bank Loan Officer SurveyNo 2018rwp-126, Working papers from Yonsei University, Yonsei Economics Research Institute Abstract: Despite renewed interest spurred by the global financial crisis, identifying a bank loan supply shock from demand-side factors remains challenging. While existing sigh-restriction studies often rely on the bank lending rate and the loan volume to identify a loan supply shock, they implicitly assume that the observed interest rate always equates supply and demand for loans. Using bank loan officer survey from eight emerging market economies (EMEs), I document a distinct cyclical pattern of bank lending standards and loan demand in the EMEs from that in the U.S. or the Euro area. Using quarterly Korean data, I demonstrate that a conventional sign-restriction approach could result in a misguided interpretation of credit slowdown when credit rationing or non-price lending terms exist. To resolve this issue, I propose an alternative identifying scheme by exploiting the information from bank loan officer survey and find that a negative loan supply shock has a strong adverse effect on output, followed by a decline in inflation and the policy rate. Keywords: Bank loan officer survey; Sign-restriction VARs; Bank lending shocks; Emerging market economies; Credit market imperfections (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:yon:wpaper:2018rwp-126 Access Statistics for this paper More papers in Working papers from Yonsei University, Yonsei Economics Research Institute Contact information at EDIRC. |
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