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The Breakdown of Credit Relations under Conditions of a Banking Crisis. A Switching Regime Approach

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  • MuÒoz, SÚnia

    (London School of Economics and CEP)

Abstract

This paper empirically analyses 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 behaviour of the bank credit function changes during a banking crisis, reflecting a generalized disruption in the stability of behavioural parameters. Usual links such as interest rate signalling on 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.

Suggested Citation

  • MuÒoz, SÚnia, 2002. "The Breakdown of Credit Relations under Conditions of a Banking Crisis. A Switching Regime Approach," Royal Economic Society Annual Conference 2002 146, Royal Economic Society.
    • Handle: RePEc:ecj:ac2002:146
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