Bank Lending Procyclicality and Credit Quality During Financial Crises

39 Pages Posted: 10 Jul 2013

See all articles by Guglielmo Maria Caporale

Guglielmo Maria Caporale

Brunel University London - Department of Economics and Finance; London South Bank University; CESifo (Center for Economic Studies and Ifo Institute); German Institute for Economic Research (DIW Berlin)

Stefano Di Colli

Federcasse Research Department; University of Teramo

Juan Sergio Lopez

Federcasse - Federazione nazionale banche di credito cooperativo

Date Written: June 25, 2013

Abstract

This paper analyses macroeconomic and financial determinants of bad loans applying a SVAR approach to investigate whether excessive loans granted during expansionary phases can explain the more than proportional increase in non-performing loans during contractionary periods. The results indicate that the effects of a permanent shock to bad loans on the excess of credit are significant and persistent for bad loans to firms, but not for bad loans to households or in the case of Cooperative Credit Banks, who adopt more efficient lending policies.

Keywords: loan losses, macroeconomic determinants, Italian banking system, SVAR

JEL Classification: E44, G01, G21, C22

Suggested Citation

Caporale, Guglielmo Maria and Di Colli, Stefano and Lopez, Juan Sergio, Bank Lending Procyclicality and Credit Quality During Financial Crises (June 25, 2013). DIW Berlin Discussion Paper No. 1309, Available at SSRN: https://ssrn.com/abstract=2291857 or http://dx.doi.org/10.2139/ssrn.2291857

Guglielmo Maria Caporale (Contact Author)

Brunel University London - Department of Economics and Finance ( email )

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HOME PAGE: http://www.brunel.ac.uk/about/acad/bbs/bbsstaff/ef_staff/guglielmocaporale/

London South Bank University ( email )

Centre for Monetary and Financial Economics
London
United Kingdom

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

German Institute for Economic Research (DIW Berlin) ( email )

Mohrenstraße 58
Berlin, 10117
Germany

Stefano Di Colli

Federcasse Research Department ( email )

Via Lucrezia Romana 41/47
Rome, 00178
Italy

University of Teramo ( email )

Via A. Balzarini 1-64100
University campus Coste Sant'Agostino
Teramo
Italy

Juan Sergio Lopez

Federcasse - Federazione nazionale banche di credito cooperativo ( email )

Via Massimo D'Azeglio 33
00184 Rome
Italy

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