A theoretical model of bank lending: Does ownership matter in times of crisis? |
| |
Institution: | 1. Bank of Finland Institute for Economies in Transition (BOFIT), Snellmaninaukio, PO Box 160, FI-00101 Helsinki, Finland;2. Norwich Business School, University of East Anglia, Norwich Research Park, Norwich, Norfolk, NR4 7TJ, United Kingdom;3. CERGE-EI, Charles University and the Academy of Sciences, Prague, Czech Republic;4. EM Strasbourg Business School, University of Strasbourg, Institut d''Etudes Politiques, 47 avenue de la Forêt Noire, 67082 Strasbourg Cedex, France;5. Institute of Economic Studies, Charles University in Prague, Czech Republic |
| |
Abstract: | The present study investigates theoretically the lending responses of government-owned and private banks in the event of unexpected financial shocks. Our model predicts that public banks provide more loans to the real sector during times of crisis, compared to private banks which cut down on lending and increase liquidity holdings. We put forth three reasons for this heterogeneous behavior. First, the objective of public banks, in contrast to their private peers, is not only to maximize profits given risks, but also to stabilize and promote the recovery of the economy. Second, public banks may suffer less deposit withdrawals or avoid a bank run in a severe crisis, because the state has better access to additional funds making a recapitalization more likely. And finally, public banks may suffer less deposit withdrawals due to their higher credibility in promising a future recapitalization in the case of a severe crisis. |
| |
Keywords: | Financial crisis Bank lending Public banks Bank runs Monetary policy |
本文献已被 ScienceDirect 等数据库收录! |
|