Modelling banks’ lending behaviour in a capital-regulated framework. (English) Zbl 1242.91153
Summary: This paper adds to the literature on the money supply theory by assessing the effect of banks’ equity on the loan generating process. First, a new ‘credit’ multiplier is examined, the so-called ‘equity’ multiplier model. This, in a second stage, is incorporated in a new multivariate lending model. The models are assessed by using panel data cointegration techniques for the G7 countries. According to our results, a feedback relationship exists between banks’ loans and equity. Moreover, the factors determining loans are: the aggregate demand, the loan – customer relation, the banks’ equity and banks’ portfolio adjustments and/or the monetary stance.
MSC:
| 91B74 | Economic models of real-world systems (e.g., electricity markets, etc.) |
| 91B64 | Macroeconomic theory (monetary models, models of taxation) |
| 91G70 | Statistical methods; risk measures |
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