Acta Univ. Agric. Silvic. Mendelianae Brun. 2015, 63(3), 995-1003 | DOI: 10.11118/actaun201563030995

Is There a Credit Crunch in the Czech Republic?

Lucie Režňáková, Svatopluk Kapounek
Department of Finance, Faculty of Business and Economics, Mendel University in Brno, Zemědělská 1, 613 00 Brno, Czech Republic

We apply a disequilibrium model of credit demand and supply to test the credit crunch hypothesis. We suppose that firms face credit rationing and a realised outstanding loan will be the minimum desired level of commercial bank loans and bank limit for the firm. We adopted the disequilibrium model which consists of credit supply and credit demand equations. We suggest that actual observed credit growth rate at time t lies on the supply curve (excess demand), or on the demand curve (excess supply), or on both (equilibrium). Our model is estimated by the full-information maximum likelihood approach with a numerical maximization of the likelihood function. Our basic findings show that significant decrease in credits after the financial crisis in the year 2007 was caused by low economic and investment activity and reject the hypothesis that there is a credit crunch in the Czech Republic.

Keywords: money supply, money demand, maximum likelihood approach, credit, financial crisis, credit crunch, disequilibrium
Grants and funding:

The results introduced in the paper have been funded with support from the Czech Science Foundation via grant No. P403/14-28848S "Financial Crisis, Depreciation and Credit Crunch in CEECs" and the European Commission, Jean Monnet Multilateral Research Group Grant No. 530069-LLP-1-2012-1-CZ-AJM-RE "CEE Banking sector stability after the reform of the European financial supervision".

Prepublished online: June 28, 2015; Published: August 1, 2015  Show citation

ACS AIP APA ASA Harvard Chicago IEEE ISO690 MLA NLM Turabian Vancouver
Režňáková, L., & Kapounek, S. (2015). Is There a Credit Crunch in the Czech Republic? Acta Universitatis Agriculturae et Silviculturae Mendelianae Brunensis, 63(3), 995-1003. doi: 10.11118/actaun201563030995
Share...
Download citation
  • BibTeX (.bib)
  • Bookends (.ris)
  • EasyBib (.ris)
  • EndNote (.enw)
  • EndNote 8 (.xml)
  • ISI WoS (.isi)
  • Medlars (.medlars)
  • Mendeley (.ris)
  • MODS (.xml)
  • Papers (.ris)
  • RefWorks (.txt)
  • RefManager (.ris)
  • RIS (.ris)
  • MS Word (.xml)
  • Zotero (.ris)
    • Open full article

    References

    1. AGÉNOR, P. R., AIZENMAN, J. and HOFFMAISTER A. W. 2004. The credit crunch in East Asia: what can bank excess liquid assets tell us? Journal of International Money and Finance, 23: 27-49. DOI: 10.1016/j.jimonfin.2003.08.008 Go to original source...
    2. ARESTIS, P. 2011. Fiscal Policy Is Still an Effective Instrument of Macroeconomic Policy. Panoeconomicus, 58(2): 143-156. DOI: 10.2298/PAN1102143A Go to original source...
    3. ARLT, J., GUBA, M., RADKOVSKÝ, Š. et al. 2001. Selected factors influencing the money demand development in 1994-2000. Politická ekonomie, 49(5): 635-657. Go to original source...
    4. ATANASOVA, C. V. and WILSON, N. 2004. Disequilibrium in the UK Corporate Loan Market. Journal of Banking and Finance, 28(23): 595-614. DOI: 10.1016/S0378-4266(03)00037-2 Go to original source...
    5. BARRO, R. J. and GROSSMAN, H. I. 1971. A General Disequilibrium Model of Income and Employment. American Economic Review, 61: 82-93.
    6. BÉNASSY, J. P. 1975. Neo-Keynesian Disequilibrium Theory in a Monetary Economy. Review of Economic Studies, 42: 503-524. DOI: 10.2307/2296791 Go to original source...
    7. BERNANKE, B., GERTLER, M. and GILCHRIST, S. 1996. The financial accelerator and flight to quality. Review of Economics and Statistics, 78: 1-15. DOI: 10.2307/2109844 Go to original source...
    8. BERROSPIDE, J. M. and EDGE, R. M. 2010. The Effects of Bank Capital on Lending: What Do We Know, and What Does it Mean? Finance and Economics Discussion Series. Washington, D.C.: Federal Reserve Board. Go to original source...
    9. BIJAPUR, M. 2010. Does monetary policy lose effectiveness during a credit crunch? Economics Letters, 106: 42-44. DOI: 10.1016/j.econlet.2009.09.020 Go to original source...
    10. BRUNNERMEIER, M. 2009. Deciphering the Liqudity and Credit Crunch 2007-8. Journal of Economic Perspectives, 23(1): 77-100. DOI: 10.1257/jep.23.1.77 Go to original source...
    11. BRUNNERMEIER, M. and PEDERSEN, L. 2009. Market Liquidity and Funding Liquidity. Review of Financial Studies, 22(6): 2201-2238. DOI: 10.1093/rfs/hhn098 Go to original source...
    12. BRZOZA-BRZEZINA, M. and MAKARSKI, K. 2011. Credit crunch in a small open economy. Journal of International Money and Finance, 30: 1406-1428. DOI: 10.1016/j.jimonfin.2011.07.010 Go to original source...
    13. CALVO, G. 2009. Financial Crises and Liquidity Shocks: A Bank-Run Perspective. NBER Working Paper, 15425. Go to original source...
    14. CALVO, G., IZQUIERDO, A. and TALVI, E. 2006. Phoenix Miracles in Emerging Markets: Recovering without Credit from Systemic Financial Crises. Inter-American Development Bank Working Paper, 570. Go to original source...
    15. CLOWER, R. W. 1965. The Keynesian Counter Revolution: A Theoretical Appraisal. In: HAHN, F. H. and BRECHLING, F. (eds), The Theory of Interest Rates. London: Macmillan.
    16. DELOOF, M. and VAN OVERFELT, W. 2008. Were Modern Capital Structure Theories Valid in Belgium Before World War I? Journal of Business Finance & Accounting, 35(3-4): 491-515. DOI: 10.1111/j.1468-5957.2008.02080.x Go to original source...
    17. DRÈZE, J. H. 1975. Existence of an Exchange Equilibrium Under Price Rigidities. International Economic Review, 16: 301-320. DOI: 10.2307/2525813 Go to original source...
    18. FAZZARI, S. M., HUBBARD, R. G. and PETERSEN, B. C. 2000. Investment-cash flow sensitivities are useful: A comment on Kaplan and Zingales. Quarterly Journal of Economics, 115: 695-705. DOI: 10.1162/003355300554773 Go to original source...
    19. FIDRMUC, J., HORVÁTH, R. and HORVÁTHOVÁ, E. 2010. Corporate Interest Rates and the Financial Accelerator in the Czech Republic. Emerging Markets Finance & Trade, 46(4): 41-54. DOI: 10.2753/REE1540-496X460403 Go to original source...
    20. FRATZSCHER, M. 2012. Capital flows, push versus pull factors and the global financial crisis. NBER Working Paper, 17357. Go to original source...
    21. GERŠL, A. and JAKUBÍK, P. 2009. Models of bank financing of Czech corporations and credit risk. Czech National Bank. Financial Stability Report 2008/2009, 92-101.
    22. GERŠL, A. and KOMÁRKOVÁ, Z. 2009. Liquidity risk and banks' bidding behavior: evidence from the global financial crisis. Czech Journal of Economics and Finance, 59(6): 577-592.
    23. HALE, G. and ARTETA, C. 2009. Currency crises and foreign credit in emerging markets: Credit crunch or demand effects? European Economic Review, 53: 758-774. DOI: 10.1016/j.euroecorev.2009.03.001 Go to original source...
    24. HANCOCK, D. and WILCOX, J. A. 1998. The "credit crunch" and the availability of credit to small business. Journal of Banking & Finance, 22: 983-1014. DOI: 10.1016/S0378-4266(98)00040-5 Go to original source...
    25. HERRERA, S., HURLIN, C. and ZAKI, C. 2013. Why don't banks lend to Egypt's private sector? Economic Modelling, 33(C): 347-356. DOI: 10.1016/j.econmod.2013.04.003 Go to original source...
    26. HURLIN, C. and KIERZENKOWSKI, R. 2007. Credit market disequilibrium in Poland: Can we find what we expect? Non-stationarity and the short-side rule. Economic Systems, 31: 157-183. DOI: 10.1016/j.ecosys.2007.02.001 Go to original source...
    27. JAKUBÍK, P. and TEPLÝ, P. 2008. Scoring as an Indicator of Financial Stability. Czech National Bank: Financial Stability Report 2007, 76-85.
    28. KALEMLI-OZCAN, S., PAPAIOANNOU, E. and PERRI, F. 2010. This Time is Different: Financial Integration and the 2007 Crisis. In: Joint conference of the European Central Bank and the Journal of International Economics. September 9.-10. 2010.
    29. KAPLAN, S. N. and ZINGALES, L. 1997. Do investment-cash flow sensitivities provide useful measures of financing constraints? Quarterly Journal of Economics, 112: 169-215. DOI: 10.1162/003355397555163 Go to original source...
    30. KAPLAN, S. N. and ZINGALES, L. 2000. Investment-cash flow sensitivities are not valid measures of financing constraints. Quarterly Journal of Economics, 115: 707-712. DOI: 10.1162/003355300554782 Go to original source...
    31. KAPOUNEK, S. 2011. Monetary policy implementation and money demand instability during the financial crisis. Acta Universitatis Agriculturae et Silviculturae Mendelianae Brunensis, 59(7): 177-186. DOI: 10.11118/actaun201159070177 Go to original source...
    32. KORINEK, A. 2011. Systemic risk-taking: Amplification effects, externalities, and regulatory responses. ECB Working Paper, 1345. Go to original source...
    33. LIVDAN, D., SAPRIZA, H. and ZHANG, L. 2009. Financially Constrained Stock Returns. Journal of Finance, 64(4): 1827-1862. DOI: 10.1111/j.1540-6261.2009.01481.x Go to original source...
    34. MADDALA, G. and NELSON, F. 1974. Maximum likelihood methods for models of market disequilibrium. Econometrica, 42: 1013-1030. DOI: 10.2307/1914215 Go to original source...
    35. MEMMEL, C., SCHMIEDER, C. and STEIN, I. 2007. Relationship lending - empirical evidence for Gemany. Deutsche Bundesbank Discussion Paper, 14/2007. Go to original source...
    36. MOYEN, N. 2004. Investment-Cash Flow Sensitivities: Constrained versus Unconstrained Firms. Journal of Finance, 59(5): 2061-2092. DOI: 10.1111/j.1540-6261.2004.00692.x Go to original source...
    37. NGUYEN, H. and QIAN, R. 2014. Demand collapse or credit crunch to firms? Evidence from the World Bank's financial crisis survey in Eastern Europe. Journal of International Money and Finance, 47: 125-144. DOI: 10.1016/j.jimonfin.2014.05.013 Go to original source...
    38. PEEK, J. and ROSENGREN, E. S. 1995. Banks and the Availability of Small Business Loans. Federal Reserve Bank of Boston Working Paper, 95-1.
    39. POGHOSYAN, T. 2011. Slowdown of credit flows in Jordan in the wake of the global financial crisis: Supply or demand driven? Economic Systems, 35: 562-573. DOI: 10.1016/j.ecosys.2011.04.004 Go to original source...
    40. POPOV, A. and UDELL, G. F. 2012. Cross-border banking, credit access, and the financial crisis. Journal of International Economics, 87: 147-161. DOI: 10.1016/j.jinteco.2012.01.008 Go to original source...
    41. SCHWARTZ, R. A. 1974. An economic model of trade credit. Journal of financial and quantitative analysis, 9(4): 643-657. DOI: 10.2307/2329765 Go to original source...
    42. SHAMSHUR, A. 2010. Access to capital and capital structure of the firm. CERGE-EI Working Paper Series, 429. Go to original source...
    43. SUMMERS, B. and WILSON, N. 2002. An Empirical Investigation of Trade Credit Demand. International Journal of the Economics of Business, 9(2): 257-270. DOI: 10.1080/13571510210135005 Go to original source...
    44. TONG, H. and WEI, S-J. 2011. The Composition Matters: Capital Inflows and Liquidity Crunch During a Global Economic Crisis. Review of Financial Studies, 24(6): 1773-1781. DOI: 10.1093/rfs/hhq078 Go to original source...
    45. VODOVÁ, P. 2009. Modelování trhu úvěrů v České republice. Karviná: Slezská univerzita v Opavě, Obchodně podnikatelská fakulta.
    46. ZDZIENICKA, A. 2011. A re-assessment of credit development in European transition economies. International Economics, 128: 33-51. DOI: 10.1016/S2110-7017(13)60002-5 Go to original source...

    This is an open access article distributed under the terms of the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License (CC BY NC ND 4.0), which permits non-comercial use, distribution, and reproduction in any medium, provided the original publication is properly cited. No use, distribution or reproduction is permitted which does not comply with these terms.


    Return to the content