Does the banking sector structure matter for credit procyclicality?

Vincent Bouvatier (), Antonia López-Villavicencio () and Valérie Mignon
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Vincent Bouvatier: EconomiX - EconomiX - UPN - Université Paris Nanterre - CNRS - Centre National de la Recherche Scientifique
Antonia López-Villavicencio: CEPN - Centre d'Economie de l'Université Paris Nord (ancienne affiliation) - UP13 - Université Paris 13 - CNRS - Centre National de la Recherche Scientifique
Valérie Mignon: EconomiX - EconomiX - UPN - Université Paris Nanterre - CNRS - Centre National de la Recherche Scientifique, CEPII - Centre d'études prospectives et d'informations internationales

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Abstract: The aim of this paper is to investigate whether the banking sector structure matters in explaining credit procyclicality for 17 OECD countries over the 1986-2010 period. To this end, we first provide a detailed classification of the banking system structure through the use of a hierarchical clustering methodology. Relying on the estimation of panel VAR models and accounting for potential heterogeneity between countries, we then propose a measure of credit procyclicality based on the impulse-response function of credit to a shock in GDP. Our findings show that while credit significantly responds to shocks in GDP, the structure of the banking sector is not a key factor in assessing the procyclicality of credit for OECD countries

Keywords: economic cycle; Credit cycle; panel VAR; financial stability; banking sector structure (search for similar items in EconPapers)
Date: 2012-07
Note: View the original document on HAL open archive server: https://hal.science/hal-05455736v1
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Published in Economic Modelling, 2012, 29 (4), pp.1035-1044. ⟨10.1016/j.econmod.2012.03.012⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-05455736

DOI: 10.1016/j.econmod.2012.03.012

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