How Repayments Manipulate Our Perceptions about Loan Dynamics after a Boom

Adalid Ramón () and Matteo Falagiarda
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Adalid Ramón: European Central Bank, Sonnemannstr. 22, Frankfurt am Main60311Germany

Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), 2020, vol. 240, issue 6, 697-742

Abstract: We propose a method to decompose net lending flows into loan origination and repayments. We show that a boom in loan origination is transmitted to repayments with a very long lag, depressing the growth rate of the stock for many periods. In the euro area, repayments of the mortgage loans granted in the boom preceding the financial crisis have been dragging down net loan growth in recent years. This concealed an increasing dynamism in loan origination, especially during the last wave of ECB’s non-standard measures. Using loan origination instead of net loans has important implications for understanding macroeconomic developments. For instance, the robust developments in loan origination in recent times explain the strengthening in housing markets better than net loans. Moreover, credit supply restrictions during the crisis are estimated to be smaller. Overall, we show that analyses of credit dynamics benefit from putting the focus on loan origination instead of net loans, especially after large booms.

Keywords: new lending; loan repayments; amortisation rate; housing markets (search for similar items in EconPapers)
JEL-codes: D14 E17 E44 G01 (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (1)

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Working Paper: How repayments manipulate our perceptions about loan dynamics after a boom (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:jns:jbstat:v:240:y:2020:i:6:p:697-742:n:2

DOI: 10.1515/jbnst-2019-0034

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