ISSN: 2056-3736 (Online Version) | 2056-3728 (Print Version)

A Bank Lending Channel that is Working via Housing or via Consumer Loans? Evidence from Europe

Stefanos Papadamou, Vaggelis Arvanitis and Costas Siriopoulos

Correspondence: S. Papadamou,

Department of Economics, University of Thessaly, Greece

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This paper, tests the bank lending channel of monetary policy transmission mechanism in a series of European countries since the Euro currency circulation. By disaggregating bank loans to households for consumer, housing and other purposes over the period 2003:Q1 to 2012:Q4, we try to shed light to any hidden dynamics by aggregate data. An unrestricted VAR model and impulse response analysis provide empirical evidence of an active bank lending channel working via housing loans for the majority of countries studied (Germany, France, Belgium, Italy, Spain, Sweden and UK). Additionally, there is evidence of a transmission mechanism proceed through consumer credit in Austria, Belgium and Netherlands. Moreover our results reveal that monetary transmission to housing loans proceeds quickly in Germany, Spain, Sweden and UK compared to the others. However in Belgium, Germany and UK, consumer credits reduction also amplifies the initial shock on GDP and on inflation produced by a tightening monetary policy. Finally, banks’ lending behaviour varies significantly according to the purposes of household loans. In Belgium, Sweden and UK, housing loans reductions coexist with increase of loans for consumption and other reasons, implying that the former is driven by supply forces while the latter by demand forces.


  Monetary policy, bank lending, Transmission mechanism VAR models


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