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MODELLING BANKS' LENDING BEHAVIOUR IN A CAPITAL‐REGULATED FRAMEWORK
Author(s) -
Karagiannis Stelios,
Panagopoulos Yannis,
Spiliotis Aristotelis
Publication year - 2012
Publication title -
metroeconomica
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.256
H-Index - 29
eISSN - 1467-999X
pISSN - 0026-1386
DOI - 10.1111/j.1467-999x.2011.04147.x
Subject(s) - loan , economics , equity (law) , cointegration , multiplier (economics) , portfolio , monetary economics , capital requirement , financial economics , econometrics , macroeconomics , profit (economics) , microeconomics , political science , law
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.