Journal of Finance and Economics

Journal of Finance and Economics

ISSN: 2291-4951 (Print)    ISSN: 2291-496X (Online)

Volume 1 (2013), No. 2, Pages 1-13

DOI: 10.12735/jfe.v1i2p01

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Credit Frictions and the Bank Lending Channel: Evidence from a Group of European Banks

Nicholas Apergis1  Efrosini Alevizopoulou1 

1Department of Banking and Financial Management, University of Piraeus, Piraeus, Greece

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Monetary policy decisions are transmitted into the economy through many channels, one of which is the bank lending channel. It is based on the central bank’s actions that affect loan supply and real spending. This paper examines, spanning the period 1999-2010, whether for the case of European banks the operation of the bank lending channel can be modeled in a manner that better conforms to current institutional realities, such as credit frictions. The recent literature on monetary policy takes into account credit frictions and investigates monetary implications. We use interest rate spreads, that is, the difference between the interest rate available to savers and borrowers, as an indicator of the disruptions in the financial situation and incorporate them into the model for the estimation of the bank lending channel across eurozone countries. The results indicate that these credit frictions have an impact on the lending growth process.

JEL Classifications: E51, C33

Keywords: bank lending channel; credit frictions; European banks; panel data

To Cite this Article: Apergis, N., & Alevizopoulou, E. (2013). Credit frictions and the bank lending channel: evidence from a group of European banks. Journal of Finance and Economics, 1(2), 1-13.

Copyright © Nicholas Apergis & Efrosini Alevizopoulou

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This article is published under license to Science and Education Centre of North America. This is an Open Access article distributed under the terms of the Creative Commons Attribution 4.0 International License.

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Credit Frictions and the Bank Lending Channel: Evidence from a Group of European Banks