IMF Working Papers

The Breakdown of Credit Relations Under Conditions of a Banking Crisis: A Switching Regime Approach

By Sònia Muñoz

July 1, 2000

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Sònia Muñoz. The Breakdown of Credit Relations Under Conditions of a Banking Crisis: A Switching Regime Approach, (USA: International Monetary Fund, 2000) accessed November 21, 2024
Disclaimer: 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

Publication Details

  • Pages:

    24

  • Volume:

    ---

  • DOI:

    ---

  • Issue:

    ---

  • Series:

    Working Paper No. 2000/135

  • Stock No:

    WPIEA1352000

  • ISBN:

    9781451855692

  • ISSN:

    1018-5941