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Perceived vs actual financial crisis and bank credit standards: is there any indication of self-fulfilling prophecy?

Dimitrios Anastasiou (), Zacharias Bragoudakis () and Stelios Giannoulakis
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Stelios Giannoulakis: Athens University of Economics and Business

No 277, Working Papers from Bank of Greece

Abstract: We link senior banks loan officers’ responses regarding their decisions for bank credit standards, from successive surveys from the European Bank Lending Survey to investigate two important issues. First, we examine the relationship between bank credit standards (CS) and perceived and actual financial crisis. Second, we investigate whether the notion of the self-fulfilling prophecy is applicable in the case of the 2008 global financial crisis. In particular, the second main research question that we try to answer is whether the perceived crisis (as implied by the Google search query “financial crisis”) contributed to the acceleration of the outburst of the actual crisis. We find that both perceived and actual financial crisis affect senior bank loan officers’ credit standards, with the actual crisis having the greatest impact. These results are consistent both in the short and in the long run. Finally, by putting forward a binary choice model we find sufficient evidence to support the Self-Fulfilling Prophecy notion.

Keywords: Credit Standards; Financial Crisis; Google Trends; Crisis Sentiment; Self-Fulfilling Prophecy. (search for similar items in EconPapers)
JEL-codes: C51 E30 E32 E44 E51 G01 G21 (search for similar items in EconPapers)
Pages: 35
Date: 2020-01
New Economics Papers: this item is included in nep-ban, nep-eec and nep-mac
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