A Credit Crunch? a Case Study of Finland in the Aftermath of the Banking Crisis

Author/Editor:

Ceyla Pazarbasioglu

Publication Date:

December 1, 1996

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

This paper estimates a disequilibrium model of credit supply and demand to evaluate whether there was a credit crunch in Finland following the banking crisis of 1991-92. Empirical analysis suggests that the marked reduction in bank lending was mainly in reaction to a cyclical decline in credit demand, likely exacerbated by the high level of indebtedness of the borrowers. It also appears that banks became less willing to supply credit during periods associated with a deterioration in asset quality, and reduced profits due to declining regulatory protection from competition, and a need to increase capital adequacy levels.

Series:

Working Paper No. 1996/135

Subject:

Bank credit Banking Banking crises Credit Credit risk Financial crises Financial institutions Financial regulation and supervision Loans Money

Notes:

Also published in Staff Papers, Vol. 44, No. 3, September 1997.

English

Publication Date:

December 1, 1996

ISBN/ISSN:

9781451855661/1018-5941

Stock No:

WPIEA1351996

Pages:

18

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