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Are Bank Credit Standards Affected by the Business Cycle? Evidence from the Euro Area

Author

Listed:
  • Dimitrios Anastasiou
  • Konstantinos Drakos
  • Stylianos Giannoulakis
Abstract
The purpose of this study is to investigate the link between bank credit standards (CS hereafter) and business cycle fluctuations. This is the first empirical study which attempts to examine whether business cycle affects bank CS. We use quarterly survey-data on CS taken from the Bank Lending Survey from 2003Q1 to 2016Q1, for 14 Euro-area countries. We find that business cycle and GDP growth trend exert a negative influence on CS, and thus business cycle and trend are two major drivers of the tightening or easing of the CS. We also find that the two components (cyclical and trend) of the real GDP decomposition affect in a symmetric way CS. Moreover, symmetry of impacts was found between the CS and the business cycle and trend for large vs. small firms. Our findings could be helpful for both the European bank regulatory authorities and for the banks’ loan officers when they are designing macroprudential policies.

Suggested Citation

  • Dimitrios Anastasiou & Konstantinos Drakos & Stylianos Giannoulakis, 2018. "Are Bank Credit Standards Affected by the Business Cycle? Evidence from the Euro Area," Applied Economics Quarterly (formerly: Konjunkturpolitik), Duncker & Humblot GmbH, Berlin, vol. 64(1), pages 5-16.
    • Handle: RePEc:dah:aeqaeq:v64_y2018_i1_q1_p5-16
    DOI: 10.3790/aeq.64.1.5
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    Cited by:

    1. Stilianos Fountas, 2018. "Introduction to the Special Issue on Applied Macroeconomics, Finance, and Banking," Applied Economics Quarterly (formerly: Konjunkturpolitik), Duncker & Humblot GmbH, Berlin, vol. 64(1), pages 1-3.
    2. Anastasiou, Dimitrios & Bragoudakis, Zacharias & Giannoulakis, Stelios, 2021. "Perceived vs actual financial crisis and bank credit standards: Is there any indication of self-fulfilling prophecy?," Research in International Business and Finance, Elsevier, vol. 58(C).

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