Do bank loans and credit standards have an effect on output? A panel approach for the euro area

Lorenzo Cappiello, Arjan Kadareja, Christoffer Kok and Marco Protopapa

No 1150, Working Paper Series from European Central Bank

Abstract: Applying the identification strategy employed by Driscoll (2004) for the United States, this paper provides empirical evidence for the existence of a bank lending channel of monetary policy transmission in the euro area. In addition, and in contrast to recent findings for the US, we find that in the euro area changes in the supply of credit, both in terms of volumes and in terms of credit standards applied on loans to enterprises, have significant effects on real economic activity. This highlights the importance of the monitoring of credit developments in the toolkit of monetary policy and underpins the reasoning behind giving monetary and credit analysis a prominent role in the monetary policy strategy of the ECB. It also points to the potential negative repercussions on real economic growth of bank balance sheet impairments arising in the context of the financial crisis erupting in mid-2007 which led to the need for banks to delever their balance sheets and possibly to reduce their loan supply. JEL Classification: C23, E51, E52, G21

Keywords: bank credit; bank lending channel; euro area; Panel data (search for similar items in EconPapers)
Date: 2010-01
New Economics Papers: this item is included in nep-ban, nep-cba, nep-eec, nep-mac and nep-mon
Note: 234084
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (54)

Downloads: (external link)
https://www.ecb.europa.eu//pub/pdf/scpwps/ecbwp1150.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ecb:ecbwps:20101150

Access Statistics for this paper

More papers in Working Paper Series from European Central Bank 60640 Frankfurt am Main, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Official Publications ().