Investigating asymmetries in the bank lending channel. An analysis using Austrian banks’ balance sheet data

Sylvia Fruehwirth-Schnatter () and Sylvia Kaufmann
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Sylvia Fruehwirth-Schnatter: Johannes Kepler Universitaet Linz, Department of Applied Statistics and Econometrics

Working Papers from Oesterreichische Nationalbank (Austrian Central Bank)

Abstract: In the present paper we use a balanced bank panel data set to obtain an inference on two dimensions of the asymmetric response of bank lending to interest rate changes. The cross-sectional dimension is captured by group-specific parameters whereby each bank’s group membership is estimated along with the model parameters. Moreover, the asymmetric response over time is modelled with switching parameters that depend on a latent state variable. The presence of two latent indicators calls for Bayesian simulation methods. The results show that three bank groups, characterized by the groups' average asset total, differ in their lending reaction to interest rate changes. Some sensitivity analysis comparing the results for different group specifications and the models' out-of-sample forecasting performance confirms our model specification.

Keywords: Bank lending; clustering; forecasting; Markov switching; Markov chain Monte Carlo; panel data. (search for similar items in EconPapers)
JEL-codes: C11 C15 E44 E51 (search for similar items in EconPapers)
Pages: 43
Date: 2003-07-28
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Citations: View citations in EconPapers (2)

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