Bank Ownership and Credit Over the Business Cycle: Is Lending by State Banks Less Procyclical?

40 Pages Posted: 28 Sep 2012

See all articles by Ata Can Bertay

Ata Can Bertay

Sabancı University; Tilburg University - European Banking Center

Asli Demirgüç-Kunt

World Bank

Harry Huizinga

Tilburg University - Center for Economic Research (CentER); Centre for Economic Policy Research (CEPR)

Multiple version iconThere are 3 versions of this paper

Date Written: July 2012

Abstract

This paper finds that lending by state banks is less procyclical than lending by private banks, especially in countries with good governance. Lending by state banks in high income countries is even countercyclical. On the liability side, state banks expand potentially unstable non-deposit liabilities relatively little during booms, especially in countries with good governance. Public banks also report loan non-performance more evenly over the business cycle. Overall our results suggest that state banks can play a useful role in stabilizing credit over the business cycle as well as during periods of financial instability. However, the track record of state banks in credit allocation remains quite poor, questioning the wisdom of using state banks as a short term counter-cyclical tool.

Keywords: lending, procyclicality, state banks

JEL Classification: G21, H44

Suggested Citation

Bertay, Ata Can and Demirgüç-Kunt, Asli and Huizinga, Harry, Bank Ownership and Credit Over the Business Cycle: Is Lending by State Banks Less Procyclical? (July 2012). Available at SSRN: https://ssrn.com/abstract=2153466

Ata Can Bertay (Contact Author)

Sabancı University ( email )

Orhanli
Istanbul, Tuzla 34956
Turkey

HOME PAGE: http://www.atabertay.com

Tilburg University - European Banking Center ( email )

PO Box 90153
Tilburg, 5000 LE
Netherlands

Asli Demirgüç-Kunt

World Bank ( email )

1818 H Street, NW
Washington, DC 20433
United States

Harry Huizinga

Tilburg University - Center for Economic Research (CentER) ( email )

P.O. Box 90153
Tilburg, 5000 LE
Netherlands
+31 13 466 2623 (Phone)
+31 13 466 3042 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
3
Abstract Views
898
PlumX Metrics