Bank ownership and credit over the business cycle: Is lending by state banks less procyclical?

Ata Bertay, Asli Demirguc-Kunt and Harry Huizinga

Journal of Banking & Finance, 2015, vol. 50, issue C, 326-339

Abstract: This paper finds that lending by state banks is less procyclical than lending by private banks, especially in countries with good governance. Lending by state banks in high income countries is even countercyclical. On the liability side, state banks expand their total liabilities and, in particular, their non-deposit liabilities relatively little during booms. Public banks also report loan non-performance more evenly over the business cycle. Overall our results suggest that state banks can play a useful role in stabilizing credit over the business cycle as well as during periods of financial instability. However, the track record of state banks in credit allocation remains quite poor, questioning the wisdom of using state banks as a short term countercyclical tool.

Keywords: State banks; Lending; Procyclicality (search for similar items in EconPapers)
JEL-codes: G21 H44 (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (133)

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Related works:
Working Paper: Bank ownership and credit over the business cycle: Is lending by state banks less procyclical? (2012)
Working Paper: Bank Ownership and Credit over the Business Cycle: Is Lending by State Banks Less Procyclical? (2012)
Working Paper: Bank ownership and credit over the business cycle: is lending by state banks less procyclical? (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:50:y:2015:i:c:p:326-339

DOI: 10.1016/j.jbankfin.2014.03.012

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