Commercial banks and business loan behavior

In order to assess the cause of the 1975 weakness in business borrowing from commercial banks, a model of the business loan market is examined and estimated for small and large commercial banks. The major results of this study are that (1) large bank and small bank markets are structurally dissimilar and thus should not be aggregated (2) superior forecasts for total business loans can be achieved by forecasting from large and small bank equations, and (3) the model does forecast the weak business loan behavior in 1975, particularly at the large banks, and tracks the current period fairly well.