Consumer credit in an era of financial liberalization: an overreaction to repressed demand?

Abstract

In this paper we empirically analyse the factors which determined consumer credit in Greece in the period before and after the financial liberalisation, while accounting for significant changes in structure due to the lifting of credit restrictions and the subsequent impressive boom of consumer loans. We use multivariate cointegration techniques to estimate a vector error correction model (VECM) and identify separate demand and supply relationships for consumer loans. We introduce demand and supply-related shifts in parameters through the inclusion of appropriate dummy variables and trends in the long-run relationships. We partly deviate from the typical Johansen procedure and estimate the model in two steps. We find that the theoretical exclusion and coefficient-size restrictions on the demand and supply cointegrating vectors are valid. Our results are consistent with the operation of a bank lending channel in Greece. We also find that the supply side was mostly responsible for the acceleration of consumer loan growth following credit liberalisation.JEL classification: E51;G21;O16;C32

Familistic welfare capitalism in crisis: social reproduction and anti-social policy in Greece

“…(1995)(1996)(1997)(1998)(1999)(2000)(2001)(2002)(2003)(2004)(2005)(2006)(2007)(2008)(2009)(2010)(2011). Source: OECDStat (2012); authors' calculations from Brissimis, Garganas, and Hall (2012). Note: Short-term loans (up to 1 year), long-term loans include lending for house purchase (more than 1 year).…”

Disentangling Loan Demand and Supply Shocks in Russia

“…We start by including the error correction terms separately. The results indicate that the loading coefficients are statistically significant and have correct signs and expected magnitudes (see de Mello and Pisu (2010); Brissimis et al (2014)). When included simultaneously, the statistical significance of loan supply error correction term is somewhat low, but the sign and the magnitude of the coefficient are in line with expectations.…”

“…Our first approach relies on cointegration analysis, in an attempt to identify long-run relationships that can be interpreted as demand and supply functions (see, for example, Hűlsewig et al (2006);de Mello and Pisu (2010);Kok Sørensen et al (2012); Brissimis et al (2014))). This approach has been previously applied to the Russian economy (Yudaeva et al (2009)).…”

“…More specifically, we estimate two cointegrating relationships representing loan demand and supply. Instead of estimating the model using in a conventional but complex VECM framework we follow Brissimis et al (2014), and conduct our estimation in a parsimonious two-step procedure. In the first step, we estimate separately the two cointegrating relationships in which the theoretical restrictions pertaining to the demand for or supply of credit are imposed 1 .…”

A discussion of joint bank and industry concentration

“…Shadow banking includes such activities as well, rendering immaterial pro-borrower institutional developments like investments indirectly through fund managers (Woolley, 2010). This is one reason the Bernanke-Blinder bank credit channel hypothesis cannot be rejected empirically (Brissimis, Garganas, & Hall, 2014). Neither the option of borrowing from the stock market can challenge the market power associated with bank lending, since the finding is that bankbased financial development and stock market development go hand in hand (Odhiambo, 2010).…”