2. Background
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The ECB hopes that higher confidence
in the EA banking system, prompted
by broadly positive stress tests results,
may eventually lead to a revival in
credit supply conditions: does
confidence really matter?
3. How to proxy confidence in the banking
system?
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Through the STOXX Europe 600 Bank Index, one of the
most comprehensive European banking indices:
4. Confidence and credit supply:
VECM and SURE models
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Vector Error Correction Estimates
Sample (adjusted): 2004Q1 2014Q3
Standard errors in ( ) & t-statistics in [ ]
Cointegrating Eq: CointEq1
LOG(SUPPLY(-1)) 1.000000
LOG(STOXX(-1)) -1.229635
(0.50409)
[-2.43933]
C -2.362827
Error Correction: D(LOG(SUPPLY)) D(LOG(STOXX))
CointEq1 -0.013880 -0.077018
(0.00436) (0.11324)
[-3.18483] [-0.68012]
D(LOG(SUPPLY(-1))) 0.065157 3.470062
(0.16906) (4.39268)
[ 0.38541] [ 0.78996]
D(LOG(SUPPLY(-2))) 0.292827 -6.492546
(0.15669) (4.07118)
[ 1.86887] [-1.59476]
D(LOG(SUPPLY(-3))) -0.054962 -2.571893
(0.17038) (4.42709)
[-0.32258] [-0.58094]
D(LOG(STOXX(-1))) -0.002785 0.360790
(0.00858) (0.22304)
[-0.32446] [ 1.61758]
D(LOG(STOXX(-2))) 0.001628 -0.433413
(0.00741) (0.19243)
[ 0.21978] [-2.25230]
D(LOG(STOXX(-3))) -0.007487 0.041174
(0.00753) (0.19559)
[-0.99466] [ 0.21051]
C 0.006015 0.046343
(0.00215) (0.05585)
[ 2.79799] [ 0.82971]
R-squared 0.884501 0.298151
System: SURE_SUPPLY_STOXX
Estimation Method: Seemingly Unrelated Regression
Date: 11/09/14 Time: 12:55
Sample: 2004Q1 2014Q3
Included observations: 43
Total system (balanced) observations 86
Linear estimation after one-step weighting matrix
Coefficient Std. Error t-Statistic Prob.
C(1) -0.013880 0.003932 -3.530099 0.0007
C(2) 0.065157 0.152525 0.427193 0.6706
C(3) 0.292827 0.141361 2.071476 0.0420
C(4) -0.054962 0.153719 -0.357547 0.7218
C(5) -0.002785 0.007745 -0.359632 0.7202
C(6) 0.001628 0.006682 0.243609 0.8082
C(7) -0.007487 0.006791 -1.102492 0.2740
C(8) 0.006015 0.001939 3.101317 0.0028
C(9) -0.077018 0.102165 -0.753855 0.4535
C(10) 3.470062 3.963050 0.875604 0.3842
C(11) -6.492546 3.672994 -1.767644 0.0815
C(12) -2.571893 3.994090 -0.643925 0.5217
C(13) 0.360790 0.201228 1.792943 0.0773
C(14) -0.433413 0.173610 -2.496471 0.0149
C(15) 0.041174 0.176461 0.233333 0.8162
C(16) 0.046343 0.050392 0.919656 0.3609
Highly significant Error
Correction term:
In the long-run, confidence
seems to matter for credit
supply
No short-run effect:
Higher confidence
does not seem to
lead to higher
lending in the SR
D(LOG(SUPPLY)) = C(1)*( LOG(SUPPLY(-1)) - 1.22963528685*LOG(STOXX(-1)) -
2.36282664678 ) + C(2)*D(LOG(SUPPLY(-1))) + C(3)*D(LOG(SUPPLY(-2))) +
C(4)*D(LOG(SUPPLY(-3))) + C(5)*D(LOG(STOXX(-1))) + C(6)*D(LOG(STOXX(-2))) +
C(7)*D(LOG(STOXX(-3))) + C(8)
Econometric analysis points to a significant and positive relation between confidence in the
banking sector and credit demand in the long-run but not in the short-run
5. Confidence and credit supply: the
Impulse-Response function*
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-100
0
100
200
300
400
500
2 4 6 8 10 12 14 16 18 20 22 24
Response of SUPPLY to SUPPLY
-100
0
100
200
300
400
500
2 4 6 8 10 12 14 16 18 20 22 24
Response of SUPPLY to STOXX
-20
-10
0
10
20
30
40
50
2 4 6 8 10 12 14 16 18 20 22 24
Response of STOXX to SUPPLY
-20
-10
0
10
20
30
40
50
2 4 6 8 10 12 14 16 18 20 22 24
Response of STOXX to STOXX
Response to Cholesky One S.D. Innovations
(*) Cholesky ordering: stoxx, credit supply
6. How to proxy the evolution of credit demand?
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Through latest ECB’s bank lending survey
Households’ credit demand:
– Over the past three months, how has the demand for loans to households
changed at your bank, apart from normal seasonal fluctuations?
Net percentage is defined as the difference between the "sum of
percentages for increased considerably and increased somewhat"
and the "sum of percentages for decreased somewhat and
decreased considerably“:
– Negative changes lower demand for credit
– Positive changes higher demand for credit
7. How to proxy the evolution of credit demand?
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8. Confidence and credit demand:
VECM and SURE models
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Highly significant Error
Correction term:
In the long-run, confidence
seems to matter for credit
demand
Significant short-
run effect:
Higher confidence
seems to have a
positive impact on
credit demand in
the SR
D(DEMAND_CC) = C(1)*( DEMAND_CC(-1) - 0.0503412362964*STOXX(-1) +
19.3434634972 ) + C(2)*D(DEMAND_CC(-1)) + C(3)*D(DEMAND_CC(-2)) +
C(4)*D(STOXX(-1)) + C(5)*D(STOXX(-2)) + C(6)
System: UNTITLED
Estimation Method: Seemingly Unrelated Regression
Sample: 2003Q4 2014Q3
Included observations: 44
Total system (balanced) observations 88
Coefficient Std. Error t-Statistic Prob.
C(1) -0.378260 0.137312 -2.754751 0.0073
C(2) -0.212901 0.166224 -1.280809 0.2042
C(3) -0.046850 0.156593 -0.299183 0.7656
C(4) 0.130339 0.052394 2.487672 0.0150
C(5) 0.062628 0.056821 1.102200 0.2739
C(6) 0.567305 1.296493 0.437569 0.6629
C(7) -0.125458 0.421832 -0.297412 0.7670
C(8) -0.133926 0.510653 -0.262265 0.7938
C(9) 0.290152 0.481065 0.603145 0.5482
C(10) 0.624007 0.160958 3.876837 0.0002
C(11) -0.153480 0.174559 -0.879244 0.3820
C(12) -1.462376 3.982922 -0.367162 0.7145
Vector Error Correction Estimates
Sample (adjusted): 2003Q4 2014Q3
Included observations: 44 after adjustments
Cointegrating Eq: CointEq1
DEMAND_CC(-1) 1.000000
STOXX(-1) -0.050341
(0.03096)
[-1.62587]
C 19.34346
Error Correction: D(DEMAND_CC) D(STOXX)
CointEq1 -0.378260 -0.125458
(0.14776) (0.45392)
[-2.56005] [-0.27639]
D(DEMAND_CC(-1)) -0.212901 -0.133926
(0.17887) (0.54949)
[-1.19028] [-0.24373]
D(DEMAND_CC(-2)) -0.046850 0.290152
(0.16850) (0.51765)
[-0.27804] [ 0.56051]
D(STOXX(-1)) 0.130339 0.624007
(0.05638) (0.17320)
[ 2.31184] [ 3.60282]
D(STOXX(-2)) 0.062628 -0.153480
(0.06114) (0.18783)
[ 1.02430] [-0.81710]
C 0.567305 -1.462376
(1.39510) (4.28584)
[ 0.40664] [-0.34121]
R-squared 0.289971 0.300495
Econometric analysis points to a significant and positive relation between confidence
in the banking sector and credit demand both in the short- and long-run.
9. Confidence and credit demand: the
Impulse-Response function*
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-2
0
2
4
6
8
10
1 2 3 4 5 6 7 8 9 10
Response of DEMAND_CC to DEMAND_CC
-2
0
2
4
6
8
10
1 2 3 4 5 6 7 8 9 10
Response of DEMAND_CC to STOXX
-10
0
10
20
30
40
50
60
1 2 3 4 5 6 7 8 9 10
Response of STOXX to DEMAND_CC
-10
0
10
20
30
40
50
60
1 2 3 4 5 6 7 8 9 10
Response of STOXX to STOXX
Response to Cholesky One S.D. Innovations
(*) Cholesky ordering: stoxx, credit demand
