Publication detail

The Role of Credit Standards as an Indicator of the Supply of Credit

KUČEROVÁ, Z. POMĚNKOVÁ, J.

Original Title

The Role of Credit Standards as an Indicator of the Supply of Credit

English Title

The Role of Credit Standards as an Indicator of the Supply of Credit

Type

conference paper

Language

en

Original Abstract

We focus on the credit standards for approving loans to enterprises and households of the Euro Area banks as an indicator of the supply of credit to answer a question whether the change of credit standards is in accordance with the loan supply. The aim of the paper is to assess the co-movement between bank loans and credit standards in Euro Area via moving and dynamic correlation and also from the wavelet co-spectrum perspectives. We use quarterly data over the period 2003/Q1-2016/Q1. We conclude that banks originated fewer loans after they tightened lending standards. However, the co-movement was more apparent in case of households when the level of new loans provided by banks was lower after the lending standards tightening (and vice versa). In case of enterprises, the behaviour of banks concerning credit standards and the loans to enterprises was more unstable. In both cases, the co-movement is characterised by short-term reactions rather than long-term trend. However, the reactions changed in two years after the financial crisis of 2007 and then in 2011when banks started following their credit standards and limited the level of new loans.

English abstract

We focus on the credit standards for approving loans to enterprises and households of the Euro Area banks as an indicator of the supply of credit to answer a question whether the change of credit standards is in accordance with the loan supply. The aim of the paper is to assess the co-movement between bank loans and credit standards in Euro Area via moving and dynamic correlation and also from the wavelet co-spectrum perspectives. We use quarterly data over the period 2003/Q1-2016/Q1. We conclude that banks originated fewer loans after they tightened lending standards. However, the co-movement was more apparent in case of households when the level of new loans provided by banks was lower after the lending standards tightening (and vice versa). In case of enterprises, the behaviour of banks concerning credit standards and the loans to enterprises was more unstable. In both cases, the co-movement is characterised by short-term reactions rather than long-term trend. However, the reactions changed in two years after the financial crisis of 2007 and then in 2011when banks started following their credit standards and limited the level of new loans.

Keywords

Wavelet co-spectrum, comovement, bank loans, credit standards

Released

15.09.2017

Publisher

Gaudeamus, University of Hradec Králové

Location

Hradec Králové

ISBN

978-80-7435-678-0

Book

35th International Conference Mathematical Methods In Economics, Conference Proceedings

Pages from

378

Pages to

392

Pages count

6

URL

BibTex


@inproceedings{BUT140107,
  author="Zuzana {Kučerová} and Jitka {Poměnková}",
  title="The Role of Credit Standards as an Indicator of the Supply of Credit",
  annote="We focus on the credit standards for approving loans to enterprises and households of the Euro Area banks as an indicator of the supply of credit to answer a question whether the change of credit standards is in accordance with the loan supply. The aim of the paper is to assess the co-movement between bank loans and credit standards in Euro Area via moving and dynamic correlation and also from the wavelet co-spectrum perspectives. We use quarterly data over the period 2003/Q1-2016/Q1. We conclude that banks originated fewer loans after they tightened lending standards. However, the co-movement was more apparent in case of households when the level of new loans provided by banks was lower after the lending standards tightening (and vice versa). In case of enterprises, the behaviour of banks concerning credit standards and the loans to enterprises was more unstable. In both cases, the co-movement is characterised by short-term reactions rather than long-term trend. However, the reactions changed in two years after the financial crisis of 2007 and then in 2011when banks started following their credit standards and limited the level of new loans.",
  address="Gaudeamus, University of Hradec Králové",
  booktitle="35th International Conference Mathematical Methods In Economics, Conference
Proceedings",
  chapter="140107",
  howpublished="print",
  institution="Gaudeamus, University of Hradec Králové",
  year="2017",
  month="september",
  pages="378--392",
  publisher="Gaudeamus, University of Hradec Králové",
  type="conference paper"
}