Credit market disequilibrium in Greece (2003-2011) - a Bayesian approach

Angelos Vouldis

No 1805, Working Paper Series from European Central Bank

Abstract: Motivated by the linkage between credit and growth in the Greek economy, and the deceleration of credit since the financial crisis, this paper studies the evolution of credit demand and supply in Greece. A disequilibrium model of demand and supply is estimated spanning the period 2003M1-2011M3. The adopted specification allows for stochastic shocks on both supply and demand. A Bayesian estimation methodology with data augmentation for the latent variables is used. The analysis is carried out separately for each type of loan (short- and long-term business loans, consumer loans and mortgages) enabling the comparative study of the credit rationing and supply constraint effects among loan categories. The results indicate that, for all loan categories, excess demand characterized the boom period. After the intensification of the debt crisis, evidence is provided for the existence of excess demand due to binding constraints on supply. However, demand for short-term business loans has slowed down more than supply, reflecting businesses JEL Classification: D50, E44, E42, C32, G21, G28, P00

Keywords: Bayesian methods; Credit disequilibrium; Greek credit market; Leading indicators; Stress Test (search for similar items in EconPapers)
Date: 2015-06
New Economics Papers: this item is included in nep-ban and nep-eec
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Citations: View citations in EconPapers (4)

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