Determinants of bank credit to the private sector: The case of Albania

Shijaku, Gerti and Kalluci, Irini (2013): Determinants of bank credit to the private sector: The case of Albania. Published in:

Abstract

This discussion paper focuses on identifying and evaluating the long run determinants of bank credit to the private sector in the case of Albania by employing a Vector Error Correction Mechanism (VECM) approach based on demand and supply indicators. Estimations show that an adjustment mechanism exists bringing bank credit back to equilibrium. The results imply that lending is positively linked to economic growth. Further, banking and financial intermediation, as well as financial liberalisation would stimulate higher lending demand. In addition, lower cost of lending, diminishing government domestic borrowing and a more qualitative bank credit would create further lending incentives. At the same time, the exchange rate is found to pick up some demand valuation and consumption smoothing effects.

• Item Type: MPRA Paper
• Language: English
• Keywords: Credit to the private sector, VECM approach
• Subjects: C - Mathematical and Quantitative Methods > C3 - Multiple or Simultaneous Equation Models ; Multiple Variables > C32 - Time-Series Models ; Dynamic Quantile Regressions ; Dynamic Treatment Effect Models ; Diffusion Processes ; State Space Models; C - Mathematical and Quantitative Methods > C5 - Econometric Modeling > C51 - Model Construction and Estimation; G - Financial Economics > G2 - Financial Institutions and Services > G21 - Banks ; Depository Institutions ; Micro Finance Institutions ; Mortgages

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