Bank ownership and credit over the business cycle: Is lending by state banks less procyclical?

A.C. Bertay, Asli Demirguc-Kunt, Harry Huizinga

Research output: Contribution to journalArticleScientificpeer-review

56 Citations (Scopus)

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 their total liabilities and, in particular, their non-deposit liabilities relatively little during booms. 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 countercyclical tool.
Original languageEnglish
Pages (from-to)326-339
JournalJournal of Banking and Finance
Volume50
DOIs
Publication statusPublished - Jan 2015

Keywords

  • state banks
  • lending
  • procyclicality

Fingerprint Dive into the research topics of 'Bank ownership and credit over the business cycle: Is lending by state banks less procyclical?'. Together they form a unique fingerprint.

  • Cite this