Do Publicly Owned Banks Lend Against the Wind?
by Thibaut Dupreya
This paper investigates the lending pattern of state-owned
banks over the business cycle. I take the endogeneity of public
banking into account by including records on both privatizations
and nationalizations during banking crises. I find
that public bank lending is (i) significantly less cyclical except
for low-income countries, (ii) asymmetric along the business
cycle, (iii) heterogeneous across stages of economic development,
and (iv) related to banks vulnerability on their funding
side. Public banks reduce their lending less during economic
downturns, but their ability to absorb negative shocks is marginally
decreasing as the size of the shock increases.
JEL Codes: G21, G28, G32, H44.
Full article (PDF, 48 pages, 421 kb)
a Paris School of Economics and Banque de France