Journal of Financial Stability Vol. 9 No. 4 2013
Public bank lending in times of crisis
Abstract
This paper studies the role of government-owned banks in the event of financial crises. The study takes an empirical perspective focusing on bank lending. We compare the lending responses across government-owned and private banks to financial crises using the balance sheet information of 764 major banks headquartered in 50 countries over the period of 1994–2009. Using a nested panel regression framework that allows for parameter shifts in the bank lending equation, we find robust evidence that government-owned banks increase their lending during crises relative to normal times, while private banks’ lending decreases. Government-owned banks thus counteract the lending slowdown of private banks. The findings suggest that governments can play an active counter-cyclical role in their banking systems directly through government-owned banks.
- DOI
- 10.1016/j.jfs.2013.01.002
- Volume
- 9
- Issue
- 4
- Pages
- 820-830
- Language
- en
- Sources
- bibtex:phds-export.bib crossref openalex