The Maturity Structure of Bank Credit: Determinants and Effects on Economic Growth

SSRN Electronic Journal 04/2008; DOI: 10.2139/ssrn.1121840


We investigate a new data set on the maturity of bank credit to the private sector in 74 countries. We show that credit maturity is longer in countries with strong institutions, low inflation, large financial markets, and where banks share information about borrowers. Furthermore, we extend the finance and growth literature by showing that credit maturity matters for economic growth. Economic growth is enhanced in countries where agents have access to long-term financing. Therefore, weak institutions, high inflation and other variables that reduce credit maturity have an impact on economic growth via their influence on credit maturity. The estimated effects are substantial in size.

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Available from: Nikola Tasić, Aug 02, 2014
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    • "This may require the transformation of the dependent variable using a log-odds ratio (log(y/1−y)). However, the coefficient estimates using the log-odds ratio are difficult to interpret in a panel setting and therefore we follow the previous literature (Demirgüç-Kunt and Maksimovic 1999; Rodrik and Velasco 1999; Tasić and Valev 2008; Valev 2006; 2007 "
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    ABSTRACT: A new data set from the transition economies shows that the private sector has increasing access to long-term bank financing. In a few transition countries credit has similar maturity structure to that in Western Europe, while in others credit remains mostly short-term. Several factors explain these differences: the political and institutional environment, inflation, economic and financial development, and the establishment of institutions that share information about borrowers. In contrast, the share of foreign-owned banks, the share of state-owned banks, and banking sector competition have no influence on credit maturity.
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    ABSTRACT: Purpose – Since the reform and opening-up policy, the long-term problem of loans became more and more serious when China's economy maintained rapid growth. The purpose of this paper is to explore the profound causes of the medium- and long-term problem of loans and the relationship between it and economic growth. Design/methodology/approach – Using panel data for 28 provinces and cities of China during 1994-2005, this paper investigates the determinants on the maturity of bank credit using threshold panel data of Hansen. In addition, using dynamics panel data, this paper investigates the effects of the maturity structure of bank credit on economic growth. Findings – The drop of bank industry concentration tends to increase the supply of long-term loans. The raise of economic growth and the increase of industrialization degree promote the demand of long-term loans, significantly. Furthermore, the threshold effects of inflation exist. When the initial inflation is lower than 3.9 percent, the raise of inflation can increase the supply of long-term loans. When the initial inflation is higher than 3.9 percent, the raise of inflation can decrease the supply of long-term loans. The increase in the supply of long-term loans can promote the economic growth. Originality/value – The paper has two innovations: first, when studying the determinants on the maturity of bank credit, using the threshold panel approach takes account of the nonlinear adjustment of inflation; second, including the maturity of bank credit into the realm of financial development studies the relationship between this and economic growth.
    No preview · Article · Jan 2011