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This paper seeks to explore whether bank credit (BC) contains useful information for mitigating economic policy uncertainty (EPU). The results of the bootstrap rolling-window test show that EPU is an effective channel for triggering BC. Additionally, it finds a feedback effect of BC on EPU, indicating that BC is a favorable tool for predicting EPU. Rising policy uncertainty leads banks to adopt aggressive or conservative credit strategies, which further increases policy adjustments. This circular relationship seems to be caught in a chicken or egg dilemma, demonstrating the importance of the government and the banking system in maintaining economic stability. [ABSTRACT FROM AUTHOR]

This paper investigates the impacts of preferential credit policy, faced by capital constraint retailers, on coordinating the supply chain. Apart from different bank's and manufacturer's risk preferences, preferential credit is also affected by the retailers' exogenous collateral. We establish the preferential credit coordinating model (PCCM) to examine the optimal decisions and coordinate the supply chain with different financing channels, such as the preferential bank loan, preferential trade credit and portfolio credit. In this paper, we conclude some critical findings. Firstly, we find that the retailer's optimal would improve its optimal order quantity in the coordinated supply chain when he finances from a risk-pursuing bank or the manufacturer. Secondly, the retailer's financial cost would be shared with the manufacturer whether the retailer utilises preferential trade credit or bank financing channel. Thirdly, the capital constraint retailer would prefer preferential trade credit to the other financing methods for the purpose that the preferential trade credit could improve the coordinated supply chain's efficiency. Finally, we capture different impacts of collateral and risk preference on the supply chain. This article supplements the existing literature on supply chain finance with a preferential credit insight into the condition of the coordinated supply chain. [ABSTRACT FROM AUTHOR]

AbstractThis research investigates the impact of monetary policy instruments employed by the Bank of Indonesia (BI), including reserve requirement (GWM), policy rate, and loan-to-value (LTV) ratio, on bank credit by sector in Indonesia. We utilize FMOLS and DOLS techniques to estimate the effects of policy instruments and COVID-19 variables on bank credit across six clusters of provinces. Our findings indicate that the GWM exhibits a negative impact, while the policy rate positively influences bank credit in all non-household sectors in Indonesia. The LTV instrument significantly affects bank credit in household sectors. Furthermore, The Covid-19 pandemic’s influence on the relationship between each policy instrument and bank credit varies across economic sectors and provincial clusters. We recommend BI to utilize the GWM and LTV instruments more frequently and exercise caution in reducing the policy rate to very low levels, as excessively low interest rates may not incentivize banks to increase lending. [ABSTRACT FROM AUTHOR]

This article scrutinises China's unexpected economic ascent as an industrial dynamo despite an underdeveloped institutional framework, driven by a fusion of the Currency and Banking School arguments. Our discourse focuses on the reorganisation of endogenous money in post-Communist China, which significantly fortified the domestic economy. We employ a two-tiered framework, firstly linking the Currency vs. Banking School debate to the crucial role of domestic bank credit creation in economic development. Subsequently, we anchor this within the context of the post-Mao reforms, illustrating how 'inside money' is deployed in a top-down manner to real industry via a bottom-up and decentralised organisational design. The emergent Chinese political economy is in our view defined by the amalgamation of neo-statist and neo-liberal credit market policies. We detail the transformative effect of evolving domestic commercial banking trends, thereby shaping a distinctive post-Communist society. [ABSTRACT FROM AUTHOR]

This study investigates the loan financing behaviours of Korean firms during the COVID-19 pandemic. I find that financially unhealthy firms and firms with insufficient collateral capacity borrowed less during the pandemic, suggesting that lenders consider credit risk in their lending decisions. Meanwhile, the results provide evidence of credit misallocation. Particularly, zombie firms were able to increase their borrowings and firms increased their borrowings irrespective of their profitability and uncertainty. These results suggest that, without careful monitoring, lenders will suffer loan loss problems to the extent that they misallocated bank credit. [ABSTRACT FROM AUTHOR]

The purpose of this article is to examine the impact of the working capital in the borrowing decision of a retailer. The proposed analysis is based on a model with a retailer, a supplier and a bank in a non-cooperative game with price-sensitive demand. The retailer, the supplier and the bank (if concerned) determine, respectively, the ordering quantity, the wholesale price and the interest rate. A Stackelberg game-theoretic approach is employed where the retailer is a follower and either the supplier or the bank is the leader. Some structural properties are first derived from the mathematical models. Then, some numerical simulations show that: (i) a trade credit guarantees the same profits for the retailer and the supplier as in the case where the retailer has sufficient cash holdings, (ii) there exist some situations where the retailer has a better profit with a borrow than with sufficient cash holdings, and (iii) borrowing decision depends on both retailer's and supplier's discount rate and the retailer's cash holdings. [ABSTRACT FROM AUTHOR]

This paper analyzes the direct and interactive effect of digital payments through institutional quality, consumption expenditure, and bank credit on economic growth for 25-member countries of the Committee on Payments and Market Infrastructures (CPMI) for 2012–2020. Using the Fixed Effect with Driscoll-Kraay Panel Corrected Estimators, it finds that a rise in digital payments positively impacts economic growth. The interaction effect of digital payments with other variables does not promote economic growth. To address differences among the selected countries and to have a robust analysis, the paper classified the selected countries into quantiles based on the GDP per capita level using the Bootstrapped Panel-Quantile Regression (BPQR) method. The BPQR confirms the positive relationship among digital payments, institutional quality, and consumption expenditure with economic growth, whereas credit impacts it negatively. Control variables, such as inflation, exchange rate, health, and unemployment, behave as per economic theories related to economic growth. [ABSTRACT FROM AUTHOR]

The purpose of this article is to analyse the impact of partisan conflict on bank credit, and take the global financial crisis as the time node to analyse the variability of this impact before and after the financial crisis. This article examines the impacts of partisan conflict on the bank credit by employing the US data covering the past 40 years and captures the variability in the effects of partisan conflict based on the rolling sample and time-varying parameter VAR analysis. The full sample results reveal that one standard deviation partisan conflict shock will shrink the bank credit growth rate to nonfinancial sectors, and the negative effects of partisan conflict on bank credit are more substantial after the global financial crisis. The rolling sample and time-varying parameter VAR analysis further confirm that the impacts of partisan conflict shock have varied substantially over time, where bank credit still negatively reacts to the impacts of partisan conflict in recent periods. Additionally, we estimate two extended models and support the intermediate role of economic policy uncertainty in transmitting the partisan conflict and the substitution effect of cross-border bank lending on domestic bank credit. Finally, our major results are unchanged by performing a series of robustness checks. The conclusion of this article is that partisan conflict has a significant impact on bank credit and shows obvious variability, which is more significant after the global financial crisis. [ABSTRACT FROM AUTHOR]

This study investigates the impact of four legal origins (i.e., English, French, German, and Scandinavian) of a sample of countries on the rate of surplus value and rule of law. It also examines how these factors affect the size of credit provided by banks and economic performance. We found that the rate of surplus value and rule of law affect both the size of bank credit and economic performance. Simultaneously, the rate of surplus value and the rule of law are correlated. Furthermore, the marginal effects of the rate of surplus value and the rule of law on economic performance differ by legal origin. [ABSTRACT FROM AUTHOR]

The study examines the inter-relationship of credit and output and brings to the fore the critical role of bank credit in financial intermediation. Applying Johansen's cointegration and vector error correction model (VECM), the study finds long run association between credit and output at the aggregate level during 1997-98:Q1 to 2019-20:Q2 as also at the sectoral level for agriculture and services during 2007-08:Q1 to 2019-20:Q2. The Gregory-Hansen test revealed break in 2013-14:Q2 in the relationship between overall credit and output possibly reflecting the absence of long-run relationship for capital intensive sector such as industry and manufacturing. The coefficient measuring long-run impact of overall credit on output in the economy showed an upward movement after the break – reflecting the combined impact of structural reforms undertaken in the banking system and availability of spare capacity. Thus, notwithstanding hiccups observed sometimes, the underlying relation of credit and output appears strong and sustained. [ABSTRACT FROM AUTHOR]

It is becoming increasingly common in recent years that Chinese government officials visit companies on site and the news about this spread widely on the Internet. Official visits can bring various benefits to companies in China, where the government still plays an important role in allocating economic resources, including bank credit. Based on the data of officials' visits to Chinese listed firms during 2006–2019, this paper finds that firms' access to short-term bank loans increases significantly after officials' visits, which, in turn, significantly enhance the degree of maturity mismatch. Furthermore, the paper finds that the stock market reacts negatively to the maturity mismatch. However, firms' stock return is discounted less for maturity mismatch both in short and long term when firms are visited by officials. The findings in this paper are helpful in profoundly understanding China's economic system and Chinese government–enterprise relationship. [ABSTRACT FROM AUTHOR]

Great inventions and substantial productivity growth of the Roaring Twenties brought unprecedented prosperity to the United States. After Black Thursday in the fall of 1929 however, the U.S. economic landscape changed dramatically. To ensure that the bitter experience of the Great Depression does not recur, Wesley Mitchell and Morris Copeland, the architects of flow-of-funds analysis, urged a better understanding of the circulation of funds, the means of payment. The new century has so far brought us many technological innovations and new ways of doing business. The objective of the paper is to find out if and how well the funds have been flowing in the U.S. economy over the past two decades, using the flow-of-funds matrix (payer-payee matrix) proposed by Tsujimura and Tsujimura ([2018]. A flow of funds analysis of the U.S. quantitative easing. Economic Systems Research, 30(2), 137–177. https://doi.org/10.1080/09535314.2018.1443908). The industrial revolution of the new century does not seem to have enough momentum circulating funds, the lifeblood of the economy. [ABSTRACT FROM AUTHOR]

By developing a novel measure of corporate borrowing exuberance the study finds that such a phenomenon is not only higher but also is pro-cyclical with the periods of credit booms in the Indian economy. The study provides initial evidence on the quality of loans against the quantum of loans made available during credit growth cycles. Our research points towards using a unified framework to identify ex-ante misallocation in bank credit, which eventually appears as non-performing assets ex-post. [ABSTRACT FROM AUTHOR]

The incentives banks face, such as the Basel Capital Accords, motivate them to favor lending with collateralized assets, rather than lending to Small-Medium Enterprises (SMEs), with associated profound economic consequences for society. Since the 1970s there has not been any direct oversight of whether or not credit contributes to GDP. We need a macroeconomic policy tool that can discriminate among different categories of credit extended to curb speculation in existing assets (non-GDP) and promote new business investment (GDP). Government money creation and private credit growth are often presumed the only two ways to enhance nominal demand, yet the Swiss Economic Circle (Wirtschaftsring-Genossenschaft or WIR) is a Swiss Bank whose creation of purchasing power for SMEs has counter-cyclically stabilized the Swiss economy for over 80 years. The Financial Stability Board (FSB) should create localized credit-creation architectures utilizing a Swiss-WIR type currency to funnel credit that reflects systemic and macroeconomic risks that individually will never be rational for banks left to themselves. [ABSTRACT FROM AUTHOR]

In contrast to the widespread view which posits that large current account deficits and net international debt were at the epicenter of the crisis in the Euro Zone, with diverging competitiveness playing a central role, this article points to the huge volume of bank credit that banks refinanced in international markets. With a focus on the Spanish economy, we ground our view in an analysis linking gross—not net—capital flows, bank credit, and gross external debt, which provides more adequate information about a country's international financing patterns and its external exposure. The main conclusion of this article is that the principle driver of gross external debt in Spain was bank credit, with accumulated current account deficits accounting for less than 50 percent of gross external debt. Other consequences in keeping with this view are: the measures of economic policy required to sort out current account imbalances—particularly wage devaluation to improve competitiveness—may do more harm than good and they do not prevent the problem of too much bank credit from occurring again, and the residence of debt holders in the Euro Zone crisis is relevant for the understanding of the crisis as the result of a power imbalance [ABSTRACT FROM AUTHOR]

This paper explores the finance-growth nexus in 14 countries from Central, Eastern and South-eastern Europe (CESEE) over the 1995-2015 period. It investigates whether including two 'non-standard' variables, i.e. a credit cycle dummy and foreign bank relevance, deepens our understanding of the role of a typical financial determinant of economic growth, i.e. bank credit. We find evidence of a negative impact of bank credit on economic growth and the significance of cyclical fluctuations of bank credit. In contrast, a higher market share of loans granted by foreign-owned banks in a cyclical upswing and stock market capitalisation are found to have a proactive effect on growth. [ABSTRACT FROM AUTHOR]

We explore the possible existence and behavior of hot money in six categories of disaggregated bilateral capital flows (equity inflows, equity outflows, bond inflows, bond outflows, banking credit inflows, and banking credit outflows) for 12 emerging markets vis-à-vis the US from 1995 to 2012 and provides several new findings. First, we identify the existence of hot money in all six categories above and conclude that both gross inflows and gross outflows can be the sources of hot money. Second, hot money in equity inflows (outflows) engages in positive (negative) feedback trading regarding local stock market returns. Third, some categories of hot money have a temporary influence on local stock market returns while the others have a permanent influence, supporting the explanations of both price pressures and information advantage. Finally, local stock market returns in half of our sample countries, which have tightened capital controls during the late 2000s global financial crisis (GFC), are more affected by hot money than in the other half. Our findings confirm several popular conjectures of hot money, and endorse the use of capital controls to limit financial vulnerability in the run-up to and during the GFC. [ABSTRACT FROM AUTHOR]

The literature on the informal credit channels of the transmission of monetary policy overlooks the distinction between price- and quantity-based policies. This article contributes to filling this gap by investigating the asymmetric effects of the two types of policies on trade-credit substitution for bank credit using data from the largest emerging economy, China. China presents an ideal experimental context, as the country has implemented both types of monetary policies in the past decades. We find strong evidence that quantity-based monetary policy has stronger effects on credit substitution in China. This evidence is robust under both static and dynamic specifications, which remains intact after the disentanglement of the interdependency of the two types of policies. By subgrouping, we find that large and state-controlled firms play the central role in creating the substitution asymmetry. Furthermore, international evidence indicates that India also witnesses substitution asymmetry skewed to quantity-based policies. The findings suggest the need for further reform of China’s financial system toward a market-based system to enhance the effectiveness of the proposed monetary policies. [ABSTRACT FROM AUTHOR]

Loan managers’ trust in entrepreneurs can be a useful tool for overcoming entrepreneurial firms’ opaqueness. Nevertheless, the possibility for loan managers to leverage trust can be affected by differences in the regulative institutions within the banks (type of bank) and by place-bound normative institutions (social context). By relying on semi-structured interviews and a survey of 450 bank-entrepreneur relationships, this study finds that a positive impact of trust in lending relationships is sensitive to different place-bound normative institutions and to the regulative institutions within the banks. The results are robust with respect to potential endogeneity issues. [ABSTRACT FROM PUBLISHER]

This article analyses the determinants of the trade credit in Spanish manufacturing small and medium-sized enterprises (SMEs) from a new perspective. Specifically, we focus on the relationship between trade credit and other relevance financial resources: bank credit and self-financing. For the first time in the literature, a quantile regression approach is used, which takes into account the heterogeneity of firms in different quantiles of trade credit distribution. Our results show that the relationship between trade credit and other financial sources presents dissimilarities, including differences in sign, on SMEs with different degrees of trade credit. Our findings help to clarify the confusing results achieved in previous research on this topic. [ABSTRACT FROM AUTHOR]

This study presents new time series data for private debt in Sweden in 1900–2013, including credit from banks, mortgage institutes and credit companies. The reconstruction of the data is a scientific task by itself, and is complicated by changed definitions, breaks in the series, and the need for occasional interpolation and cross-reference of sources. The obtained data reveal both qualitative and quantitative changes in the structure of private debt in Sweden during the period. One finding is a pattern where the era starting with the deregulation of the credit market in 1985 resembles the era preceding World War Two. Both periods experienced a high level of private debt-to-GDP ratio as well as severe financial crises. In a first application of the data, the hypothesis of rising private debt in the years before a financial crisis is explored through logit regression. The findings are in line with international research, and suggest that higher lending, especially from banks, might aggravate the risk of financial crisis. [ABSTRACT FROM PUBLISHER]

Using quarterly data (2010Q1–2013Q4), the study makes an initial attempt to explain the housing prices for 15 major cities of different regions in India. The overall result demonstrates that there is a dominance of fundamental factors over the non-fundamental factor (speculative factors) in explaining the regional housing prices. Further, among the fundamental factors, it is observed that the share price index, non-food bank credit and foreign direct investment positively explain the housing prices, while inflation rate and a partial measure of wealth (i.e. market capitalisation) negatively explain the same. The price of gold, real effective exchange rate and net portfolio investments don’t have any influence on the housing prices. This could to some extent signify a lack of market integration among various asset markets in the Indian situation. This might also be the reason for the lesser role of speculative factors in the Indian housing market. [ABSTRACT FROM PUBLISHER]

It is generally believed that Government’s fiscal deficits, only when financed by central bank’s new money creation, will be inflationary in nature. In this paper, we demonstrate using a simplified comparative static model based on aggregate money supply, accounting that the inflation impact of fiscal deficits financed through bonds representing commercial banks’ credit to the Government can be similar to conventional monetized fiscal deficits. Our framework does not require stable money multiplier and other simplified assumptions pertaining to base money supply. We provide empirical evidence on fiscal deficits significantly affecting inverted broad money demand and thereby supporting our theoretical perspective. The findings emerging from the paper have implications for monetary and fiscal policies. [ABSTRACT FROM PUBLISHER]

In the mid-1920s L. Albert Hahn's Economic Theory of Bank Credit (1920) had become one of the most influential and certainly the most controversial books on monetary theory in the German-language area. Hahn wanted to overcome the orthodox view that every credit has to be financed by means of savings deposited by the banks. Banks are producers of credit that is not limited by the amount of saving. Capital was seen by Hahn as the result of credit creation and not of saving. Over time Hahn moderated some exaggerations of the first two editions of The Economic Theory of Bank Credit, such as the idea of a permanent boom. The paper also compares Hahn's views on the role and effects of credit with those of Schumpeter and investigates Hahn's claim to have anticipated essential ideas of Keynes's General Theory. [ABSTRACT FROM AUTHOR]

The aim of this paper is to provide an interpretation of Veblen's theory of money, production, and wages, based on the view that his approach falls within the so-called monetary theory of production (MTP), and that significant elements of similarity with Keynes's view can be traced in his works. It will be shown that social conflict-driven by workers' reaction to a wage policy that violates the "limit of tolerance"-generates increases in employment. This effect occurs in a theoretical context in which the path of real wages is affected by (a) banking policy, via the manipulation of the interest rate, and (b) by the behavior of firms, in a context where-following Veblen-the firm is a locus of conflict, involving technicians (interested in expanding production) and "businessmen" (interested in gaining money profits via the management of the "pecuniary side" of the firm). [ABSTRACT FROM AUTHOR]

Relevant economic literature frequently focuses on the impact of credit shocks on housing prices. The macroeconomic doctrine of the new consensus macroeconomics completely ignores bank credit. However, the Great Recession has highlighted the importance of bank credit. The purpose of this article is to revisit this important macroeconomic variable. Consequently, we propose to endogenize the volume of bank credit by paying special attention to those variables that are related to the real estate market, which can be considered as key to the evolution of bank credit. Our theoretical hypothesis is tested by means of a sample of nine economies of the Organization for Economic Cooperation and Development (OECD) from 1970 to 2011. For this purpose, we apply the cointegration technique, which permits the modeling of the long-run equilibrium relationship and the short-run dynamics along with an error-correction term. [ABSTRACT FROM AUTHOR]

This article recognizes the simultaneity of firms' decision in choosing between the various options of external financing. Additionally, the analysis allows the combination of bank finance and trade credit finance to vary with the firm's size even when all the firms are operating within the same financial infrastructure. We use cross-sectional data for the retail sector in India and apply structural break analysis common to time-series analysis to a system of simultaneous equations to split the sample into small and large firms. We find that the smaller firms depend more strongly on trade credit than the larger firms. Bank credit is found to be strongly related with the proxy for available collateral for the small firms but not for the large firms indicating that the large firms are unconstrained with respect to bank credit. [ABSTRACT FROM AUTHOR]

Using quarterly data, 1999:Q2–2009:Q3, we empirically examine the key macro determinants of housing prices for China’s residential market. Employing Granger causality and Vector Auto-Regression (VAR) models, we find that there exists strong bivariate causality between house price increases and its determinants. The variance decomposition suggests that speculative factors reflected by past increases in real house price contribute a relatively larger proportion to house price rises relative to fundamental factors. [ABSTRACT FROM AUTHOR]

This study examines the dynamic causal relationships between house prices and their five determinants - real income, short-run real interest rates, real stock price index, real effective exchange rate, and real non-food bank credit - by using the quarterly data from 1996:Q1 to 2007:Q1 for India. Using the cointegration test and the vector error-correction model (VECM), the study finds that in the long run, real income significantly and positively influences the housing prices while real non-food bank credit adversely influences it. The variance decomposition results suggest that it is the shocks to the non-food bank credit that mainly explains the variability in housing prices, besides its own shocks being the most influential while other factors are not significant. This suggests that the role of credit availability as a supply side determinant cannot be underestimated in the dynamic behaviour of housing prices in emerging economies. [ABSTRACT FROM AUTHOR]

The introduction of economic reforms in India, particularly reforms in the banking sector, although boosted and edged up the profits and improved efficiency of the banks, an unwarranted consequence was the decline in credit to the less developed states and regions. The emphasis on efficient allocation of resources overlooked the developmental needs of these regions and states. This study examines the role of banks in the different states of India in the post-reform period and explores multi-dimensional role of credit in terms of, what it calls, the G-GUIDE indicators. Bank credit in the present study is examined in terms of growth, globalization, urbanization, inequality, reduction in poverty (development) and the empowerment of women. [ABSTRACT FROM AUTHOR]