Do Better Capitalized Banks Lend Less? Long-Run Panel Evidence from Germany
Claudia Buch and
Esteban Prieto ()
No 3836, CESifo Working Paper Series from CESifo Group Munich
Insufficient capital buffers of banks have been identified as one main cause for the large systemic effects of the recent financial crisis. Although higher capital is no panacea, it yet features prominently in proposals for regulatory reform. But how do increased capital requirements affect business loans? While there is widespread belief that the real costs of increased bank capital in terms of reduced loans could be substantial, there are good reasons to believe that the negative real sector implications need not be severe. In this paper, we take a long-run perspective by analyzing the link between the capitalization of the banking sector and bank loans using panel cointegration models. We study the evolution of the German economy for the past 60 years. We find no evidence for a negative impact of bank capital on business loans.
Keywords: bank capital; business loans; cointegration (search for similar items in EconPapers)
JEL-codes: G20 E50 C33 (search for similar items in EconPapers)
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Journal Article: Do Better Capitalized Banks Lend Less? Long-Run Panel Evidence from Germany (2014)
Working Paper: Do Better Capitalized Banks Lend Less? Long-Run Panel Evidence from Germany (2012)
Working Paper: Do better capitalized banks lend less? Long-run panel evidence from Germany (2012)
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Persistent link: http://EconPapers.repec.org/RePEc:ces:ceswps:_3836
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