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Loan loss provisioning, bank credit and the real economy

journal contribution
posted on 2023-05-19, 07:40 authored by Pool, S, de Haan, L, Jacobs, JPAM
This paper examines how credit risk affects bank lending and the business cycle. We estimate a panel Vector Autoregression model for an unbalanced sample of 12 OECD countries over the past two to three decades, consisting of the output gap, inflation, the short-term interest rate, bank lending, as well as loan loss provisioning by banks (as proxy for credit risk). Our main findings are that: (i) bank lending and loan loss provisioning are important drivers of business cycle fluctuations, (ii) loan loss provisioning decreases in relative terms as bank lending increases, and (iii) bank lending is primarily affected by output fluctuations.

History

Publication title

Journal of Macroeconomics

Volume

45

Pagination

124-136

ISSN

0164-0704

Department/School

TSBE

Publisher

Louisiana State Univ Pr

Place of publication

Baton Rouge, USA, La, 70893

Rights statement

?Copyright 2015 Elsevier Inc. All rights reserved.

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