The loan puzzle in Mexico

Luis Fernando Colunga-Ramos

Latin American Journal of Central Banking (previously Monetaria), 2025, vol. 6, issue 1

Abstract: Empirical evidence for advanced economies suggests that following a monetary tightening, commercial and industrial bank loans show a positive “puzzling response”. Since there is no wide evidence for the Mexican case, this paper analyzes the response of bank loans at the sectoral level after a monetary contraction. For this purpose, I estimate a structural VAR model with block exogeneity to identify a monetary shock for a small open economy. The results show evidence of firms’ loan puzzles during 2001-2019 characterized by an inflation-targeting regime in Mexico. Those short-lived loan puzzles are mainly observed in sectors with the lowest delinquency rates during the period of analysis. My finding of the loan puzzle at the aggregate level in a recent sample arises in a closed as well as in an open economy approach.

Keywords: Bank lending channel; Loan puzzle; Monetary policy shocks; SVAR (search for similar items in EconPapers)
JEL-codes: E51 E52 E58 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:lajcba:v:6:y:2025:i:1:s2666143824000413

DOI: 10.1016/j.latcb.2024.100160

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Latin American Journal of Central Banking (previously Monetaria) is currently edited by Manuel Ramos-Francia

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