Domestic Credit in Times of Supervision: An Empirical Investigation of European Countries

Thomas Jobert (), Alexandru Monahov and Anna Tykhonenko ()

No 2014-30, GREDEG Working Papers from Groupe de REcherche en Droit, Economie, Gestion (GREDEG CNRS), Université Côte d'Azur, France

Abstract: We study the impact of prudential supervision on domestic credit in 27 countries throughout 1999-2012. We use the Empirical Iterative Bayes’ estimator to account for country heterogeneity. We find: (i) the interest rate not to be a fundamental variable in explaining domestic credit, (ii) negative relations between credit sensitivity to past investment and to financial dependence, (iii) the effects of supervision on credit differ by country, but (iv) without systematic negative impact of increased supervisory stringency. Our results are coherent with two interpretations: one encouraging regulatory set-ups where increased supervision positively affects credit, and another cautioning about the associated risks.

Keywords: Prudential supervision; Supervision in the EU; Banking system supervision; Financial institution regulation; Bayesian shrinkage estimator (search for similar items in EconPapers)
JEL-codes: C51 E65 G28 (search for similar items in EconPapers)
Pages: 33 pages
Date: 2014-10
New Economics Papers: this item is included in nep-ban, nep-cba, nep-eec and nep-mac
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Related works:
Working Paper: Domestic Credit in Times of Supervision: an Empirical Investigation of European Countries (2015)
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