Bank Ownership and Credit over the Business Cycle

Is Lending by State Banks Less Procyclical?

A.C. Bertay, A. Demirgüc-Kunt, H.P. Huizinga

Research output: Working paperDiscussion paperOther research output

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Abstract

Abstract: This paper finds that lending by state banks is less procyclical than lending by private banks, especially in countries with good governance. Lending by state banks in high income countries is even countercyclical. On the liability side, state banks expand potentially unstable non-deposit liabilities relatively little during booms, especially in countries with good governance. Public banks also report loan non-performance more evenly over the business cycle. Overall our results suggest that state banks can play a useful role in stabilizing credit over the business cycle as well as during periods of financial instability. However, the track record of state banks in credit allocation remains quite poor, questioning the wisdom of using state banks as a short term counter-cyclical tool.
Original languageEnglish
Place of PublicationTilburg
PublisherFinance
Number of pages38
Volume2012-049
Publication statusPublished - 2012

Publication series

NameCentER Discussion Paper
Volume2012-049

Fingerprint

Business cycles
Bank ownership
Lending
Bank credit
Liability
Loans
Credit allocation
Income
Wisdom
Financial instability
Credit

Keywords

  • state banks
  • lending
  • procyclicality

Cite this

Bertay, A. C., Demirgüc-Kunt, A., & Huizinga, H. P. (2012). Bank Ownership and Credit over the Business Cycle: Is Lending by State Banks Less Procyclical? (CentER Discussion Paper; Vol. 2012-049). Tilburg: Finance.
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abstract = "Abstract: This paper finds that lending by state banks is less procyclical than lending by private banks, especially in countries with good governance. Lending by state banks in high income countries is even countercyclical. On the liability side, state banks expand potentially unstable non-deposit liabilities relatively little during booms, especially in countries with good governance. Public banks also report loan non-performance more evenly over the business cycle. Overall our results suggest that state banks can play a useful role in stabilizing credit over the business cycle as well as during periods of financial instability. However, the track record of state banks in credit allocation remains quite poor, questioning the wisdom of using state banks as a short term counter-cyclical tool.",
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Bertay, AC, Demirgüc-Kunt, A & Huizinga, HP 2012 'Bank Ownership and Credit over the Business Cycle: Is Lending by State Banks Less Procyclical?' CentER Discussion Paper, vol. 2012-049, Finance, Tilburg.

Bank Ownership and Credit over the Business Cycle : Is Lending by State Banks Less Procyclical? / Bertay, A.C.; Demirgüc-Kunt, A.; Huizinga, H.P.

Tilburg : Finance, 2012. (CentER Discussion Paper; Vol. 2012-049).

Research output: Working paperDiscussion paperOther research output

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