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Other financial corporations: Cinderella or ugly sister of empirical monetary economics?

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  • K. Alec Chrystal

    (Cass Business School, London, UK)

  • Paul Mizen

    (University of Nottingham, UK)

Abstract

This paper reports estimates of an econometric model of the determinants of OFCs' broad money holding and M4 lending to OFCs. This is of interest both as providing information about a component of UK money and credit aggregates and because it provides some evidence of the link between financial activity and growth of the real economy. We model the long-run equilibria for money holding and lending to this sector as being driven by GDP, wealth, the return to financial services and various interest spreads. The dynamics of OFCs' money and lending are shown to be interdependent. We then consider the evidence for interactions between OFCs and other sectors. Our results indicate that M4 lending to OFCs is significantly related to aggregate investment in the long run, but is largely unrelated to the spending of households. Copyright © 2005 John Wiley & Sons, Ltd.

Suggested Citation

  • K. Alec Chrystal & Paul Mizen, 2005. "Other financial corporations: Cinderella or ugly sister of empirical monetary economics?," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 10(1), pages 63-80.
    • Handle: RePEc:ijf:ijfiec:v:10:y:2005:i:1:p:63-80
    DOI: 10.1002/ijfe.258
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    Cited by:

    1. Giuseppe Ferrero & Andrea Nobili & Patrizia Passiglia, 2007. "The sectoral distribution of money supply in the Euro area," Temi di discussione (Economic working papers) 627, Bank of Italy, Economic Research and International Relations Area.
    2. Jawadi, Fredj & Sousa, Ricardo M., 2013. "Money demand in the euro area, the US and the UK: Assessing the role of nonlinearity," Economic Modelling, Elsevier, vol. 32(C), pages 507-515.
    3. Giuseppe Ferrero & Andrea Nobili & Patrizia Passiglia, 2011. "Assessing excess liquidity in the euro area: the role of sectoral distribution of money," Applied Economics, Taylor & Francis Journals, vol. 43(23), pages 3213-3230.
    4. Chrystal, Alec & Mizen, Paul, 2002. "Modelling credit in the transmission mechanism of the United Kingdom," Journal of Banking & Finance, Elsevier, vol. 26(11), pages 2131-2154, November.
    5. James Cloyne & Ryland Thomas & Alex Tuckett & Samuel Wills, 2015. "An Empirical Sectoral Model of Unconventional Monetary Policy: The Impact of QE," Manchester School, University of Manchester, vol. 83, pages 51-82, September.
    6. Bruggeman, Annick & Donnay, Marie, 2003. "A monthly monetary model with banking intermediation for the euro area," Working Paper Series 264, European Central Bank.

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