Credit market and prediction of its future development

Vodová, Pavla (2008): Credit market and prediction of its future development. Published in:

Abstract

This study focuses on the credit market in the Czech Republic. The aim of this paper is to carry out an econometric investigation of supply and demand on the credit market and to predict the development in the future. The first part of the paper briefly characterizes the credit market in the Czech Republic. As a result of banking crisis, the growth rate of credits provided to private sector has decreased sharply and is recovering only gradually. It has caused many problems especially to nonfinancial companies. Next chapter discuss the essence of disequilibrium model. Credit markets are very often characterized by the fact that the interest rate does not clean the market and the discrepancy between credit demand and credit supply occurs. The fact that it is impossible to measure credit demand and credit supply quantities can be solved by the use of disequilibrium model. In the framework of disequilibrium model, the credit demand and credit supply functions are estimated under the restriction that the minimum of the two determines credit. The last chapter describes the data used and the empirical findings. The analysis is based on quarterly data covered the period from the first quarter of 1994 to the fourth quarter of 2006. Based on parameter estimates, the volume of credit demand and credit supply is calculated and compared with the actual volume of credit. The future development of the Czech credit market is predicted.

• Item Type: MPRA Paper
• Language: English
• Keywords: credit market; lending activity; disequilibrium model; credit demand and supply
• Subjects: C - Mathematical and Quantitative Methods > C1 - Econometric and Statistical Methods and Methodology: General > C13 - Estimation: General; G - Financial Economics > G2 - Financial Institutions and Services > G21 - Banks ; Depository Institutions ; Micro Finance Institutions ; Mortgages

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