The Breakdown of Credit Relations Under Conditions of a Banking Crisis: A Switching Regime Approach
July 1, 2000
Download PDF
More Formats on IMF eLibrary
Order a Print CopyDisclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate
Summary
This paper empirically analyzes the effects of a banking crisis on bank credit to the private sector for a panel of developing, developed, and transition economies for the period 1970-1998. The model illustrates how the behavior of the bank credit function changes during a banking crisis, reflecting a generalized disruption in the stability of behavioral parameters. Usual links such as interest rate signaling for lending, and synergy between deposits and loans, fall apart. Moreover, this study gives support to Third Generation Models in their ability to predict banking crises. Based on the empirical findings, the paper then provides policy implications for monetary policy.
Subject: Bank credit, Banking, Banking crises, Central banks, Credit, Currency crises, Financial crises, Money, Open market operations
Keywords: Bank credit, bank credit to the private sector, Bank Supply of Credit, banking activity, banking business variable, Banking Crises, banking crisis, banking distress, banking policy, business variable, Credit, Currency crises, discount window, forthcoming banking crisis, lending boom, lending interest rate variable, Monetary Policy Instruments, occurrence of a banking crisis, Open market operations, private sector, sterilized discount window lending, WP
Pages:
24
Volume:
2000
DOI:
Issue:
135
Series:
Working Paper No. 2000/135
Stock No:
WPIEA1352000
ISBN:
9781451855692
ISSN:
1018-5941
