Loan Supply Shocks in Macedonia: A Bayesian SVAR Approach with Sign Restrictions

Rilind Kabashi and Katerina Suleva ()
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Katerina Suleva: Monetary Policy and Research Department, National Bank of the Republic of Macedonia, Skopje, Republic of Macedonia

Croatian Economic Survey, 2016, vol. 18, issue 1, 5-33

Abstract: This paper analyzes the effects of loan supply, as well as aggregate demand, aggregate supply and monetary policy shocks between 1998 and 2014 in Macedonia using a structural vector autoregression model with sign restrictions and Bayesian estimation. The main results indicate that loan supply shocks have no significant effect on loan volumes and lending rates, or on economic activity and prices. The effects of monetary policy on lending activity are fairly limited, although there is some evidence that it affects lending rates more than loan volumes. Monetary policy shocks have strong effects on inflation, while the central bank reacts strongly to adverse shocks hitting the economy. Baseline results are confirmed by several robustness checks. According to historical decomposition, the lending activity was supporting economic growth before and during the crisis, but its contribution became negative during the recovery and it was a drag on growth until the end of the period. Pre-crisis GDP growth is mostly explained by supportive monetary policy. However, the restrictive monetary policy during the crisis contributed to the fall of GDP, before becoming supportive again during the early stages of the recovery. Policy rates in recent years mostly reflect subdued lending activity and aggregate supply factors, which the central bank tries to counteract with a more accommodative policy.

Keywords: loan supply; monetary policy; Bayesian VAR; sign restrictions; Macedonia (search for similar items in EconPapers)
JEL-codes: C11 C32 E51 E52 (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Working Paper: Loan supply shocks in Macedonia: a Bayesian SVAR approach with sign restrictions (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:iez:survey:ces-v18_1-2016_kabashi-suleva

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