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Interest rate elasticity of bank loans: The case for sector-specific capital requirements

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  • Hense, Florian

Abstract

Empirical credit demand analysis undertaken at the aggregate level obscures potential behavioral heterogeneity between various borrowing sectors. Looking at disaggregated data and analyzing bank loans to non-financial companies, to financial companies, to households for consumption and for house purchases separately with respect to a common set of macroeconomic determinants may facilitate more accurate empirical relationships and more reliable insights for economic policy. Using quarterly Euro area panel data between 2003 and 2013, empirical evidence for heterogeneity in borrowing behavior across sectors and the credit cycle with respect to interest rates, output and house prices is found. The results motivate sector-specific, counter-cyclical capital requirements.

Suggested Citation

  • Hense, Florian, 2015. "Interest rate elasticity of bank loans: The case for sector-specific capital requirements," CFS Working Paper Series 504, Center for Financial Studies (CFS).
    • Handle: RePEc:zbw:cfswop:504
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    Cited by:

    1. van Eeghen, Piet-Hein, 2021. "Funding money-creating banks: Cash funding, balance sheet funding and the moral hazard of currency elasticity," International Review of Financial Analysis, Elsevier, vol. 76(C).
    2. Gabriele Tondl, 2016. "Interest rates, corporate lending and growth in the Euro Area," Department of Economics Working Papers wuwp227, Vienna University of Economics and Business, Department of Economics.

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    More about this item

    Keywords

    bank loans; disaggregation; interest rate elasticity; macro-prudential tools;
    All these keywords.

    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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