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Identification of a loan supply function: A cross-country test for the existence of a bank lending channel

 

 

Sophocles N. Brissimis

Bank of Greece and University of Piraeus

 

Matthaios D. Delis

Athens University of Economics and Business

 

 

 
Abstract

Using the theoretical predictions of the Bernanke-Blinder (1988) model, we seek to examine the existence of a bank lending channel through the empirical identification of a loan supply function and to assess the impact of differential bank characteristics on banks’ ability to supply loans. To this end, we estimate a loan supply model and test for the restrictions implied by perfect substitutability between loans and bonds in bank portfolios. Estimations are carried out on bank panel data for 16 OECD countries, the results showing that a bank lending channel is at work in only two of them. Moreover, and contrary to standard accounts, we find that the relevance of bank characteristics is hardly a decisive factor in the identification of a loan supply function. 

 

 

Keywords: Bank lending channel; financial structure; dynamic panels   

JEL classification: C23; C52; E44; E52

 

 

Acknowledgements: We are grateful to Antonis Demos, Heather Gibson, Nicholas Magginas and Efthymios Tsionas for helpful comments. The views expressed in this paper do not necessarily reflect those of the Bank of Greece.

 

 

Correspondence:

Sophocles N. Brissimis

Economic Research Department,

Bank of Greece, 21 E. Venizelos Ave.,

102 50 Athens, Greece,

Tel.: +30 210 320 2388

Fax: +30 210 320 2432

Email: sbrissimis@bankofgreece.gr

 


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