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on Banking |
| By: | Richard Heuver; Ron Berndsen |
| Abstract: | The Liquidity Coverage Ratio (LCR) requirement of the Basel III framework is aimed at making banks more resilient against liquidity shocks and indicates the extent to which a bank is able to meet its payment obligations over a 30-day stress period. Notwithstanding the fact that it forms an important addition to the available information for regulators, it presents information on the status of a single bank on a monthly reporting basis. In this paper we generate an LCR-like statistic on a daily basis and simulate liquidity failure of each of the systemically important banks, using historical payments data from TARGET2. The aim of the paper is to uncover paths of contagion. The trigger is a bank with a deteriorating LCR and the knock-on effect is modelled as the impact on the LCR of other banks. We generate then the cascade of contagion, which in general consists of multiple paths, trying to answer the question to what extent the financial network further deteriorates. In doing so we provide paths of contagion which give a sense of potential systemic risk present in the network. We find that the majority of damage is caused by a small group of large banks. Furthermore we find groups of banks that are very vulnerable to shocks, regardless of the size or location of the disruption. Our model reveals that the shortfall of liquidity at the stressed bank is a more important driver than the addition of liquidity at the other banks. A version of the contagion network based on a 14-day period reveals a monthly pattern, which is in line with other literature in which window dressing is addressed. The data used in this paper are available to supervisors, central banks and resolution authorities, therefore making it possible to anticipate contagion of failing liquidity coverage within their payment network on a daily basis. |
| Keywords: | Liquidity Coverage; Basel III; payment systems; graph theory; simulation modeling |
| JEL: | E58 G21 E42 C63 |
| Date: | 2020–03 |
| URL: | http://d.repec.org/n?u=RePEc:dnb:dnbwpp:678&r=all |
| By: | Nakashima, Kiyotaka; Ogawa, Toshiaki |
| Abstract: | This study examines the impact of strengthening bank capital supervision on bank behavior in the incomplete and complete enforcement of regulations. In a dynamic model of banks facing idiosyncratic shocks, banks accumulate regulatory capital and decrease charter value and lending in the short run, while in the long run, the banking system achieves stability. To test the short-run implications, we utilize the introduction of the prompt corrective action program in Japan as a natural experiment. Using some empirical specifications with bank- and loan-level data, we find empirical evidence consistent with the theoretical predictions. |
| Keywords: | regulatory surveillance; incomplete enforcement; heterogeneous bank model; prompt corrective action; bank capital ratio; credit crunch |
| JEL: | G00 G21 G28 |
| Date: | 2020–04–29 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:99938&r=all |
| By: | José María Serena Garralda; Serafeim Tsoukas |
| Abstract: | Using a cross-country sample of bank-dependent public firms we study the international spillovers of a change in banking regulation on corporate borrowing. For identification we examine how US firms' liabilities vis-à-vis banks, non-bank lenders and bond markets evolve after an increase in capital requirements implemented by the European Banking Authority (EBA) in 2011. We find that US firms experience a reduction in credit lines but not in term loans from EU banks. In addition, US firms are able to compensate for the reduction in credit lines from EU banks by securing liquidity facilities from US non-bank financial institutions, without increasing borrowing from corporate bond markets. These results suggest that diversified domestic loan markets, with both banks and non-bank financial institutions providing loans to corporations, can help overcome cuts in cross-border bank funding. |
| Keywords: | credit lines, term loans, bank capital requirements, firm-level data, non-bank financial intermediaries |
| JEL: | G21 G32 F32 F34 |
| Date: | 2020–04 |
| URL: | http://d.repec.org/n?u=RePEc:bis:biswps:857&r=all |
| By: | Christophe Croux; Julapa Jagtiani; Tarunsai Korivi; Milos Vulanovic |
| Abstract: | This study examines key default determinants of fintech loans, using loan-level data from the LendingClub consumer platform during 2007–2018. We identify a robust set of contractual loan characteristics, borrower characteristics, and macroeconomic variables that are important in determining default. We find an important role of alternative data in determining loan default, even after controlling for the obvious risk characteristics and the local economic factors. The results are robust to different empirical approaches. We also find that homeownership and occupation are important factors in determining default. Lenders, however, are required to demonstrate that these factors do not result in any unfair credit decisions. In addition, we find that personal loans used for medical financing or small business financing are more risky than other personal loans, holding the same characteristics of the borrowers. Government support through various public-private programs could potentially make funding more accessible to those in need of medical services and small businesses without imposing excessive risk to small peer-to-peer (P2P) investors. |
| Keywords: | crowdfunding; lasso selection methods; peer-to-peer lending; household finance; machine learning; financial innovation; big data; P2P/marketplace lending |
| JEL: | G21 D14 D10 G29 G20 |
| Date: | 2020–04–16 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedpwp:87815&r=all |
| By: | Eric Jondeau (University of Lausanne - Faculty of Business and Economics (HEC Lausanne); Swiss Finance Institute); Benoît Mojon (Bank for International Settlements (BIS)); Jean-Guillaume Sahuc (Banque de France; Université Paris Ouest - Nanterre, La Défense - EconomiX) |
| Abstract: | The cost of bank funding on money markets is typically the sum of a risk-free rate and a spread that reflects rollover risk, i.e., the risk that banks cannot roll over their short-term market funding. This risk is a major concern for policymakers, who need to intervene to prevent the funding liquidity freeze from triggering the bankruptcy of solvent financial institutions. We construct a new indicator of rollover risk for banks, which we call the forward funding spread. It is calculated as the difference between the three-month forward rate of the yield curve constructed using only instruments with a three-month tenor and the corresponding forward rate of the default-free overnight interest swap yield curve. The forward funding spread usefully complements its spot equivalent, the IBOR-OIS spread, in the monitoring of bank funding risk in real time. First, it accounts for market participants' expectations of how funding costs will evolve over time. Second, it identifies liquidity regimes, which coincide with the levels of excess liquidity supplied by central banks. Third, it has much higher predictive power for economic growth and bank lending in the United States and the euro area than the spot IBOR-OIS, credit default swap spreads or bank bond credit spreads. |
| Keywords: | Bank funding risk, bank credit spreads, liquidity supply regimes, multi- curve environment, economic activity predictability. |
| JEL: | E32 E44 E52 |
| Date: | 2020–04 |
| URL: | http://d.repec.org/n?u=RePEc:chf:rpseri:rp2020&r=all |
| By: | Yifei Cao (School of Economics, University of Nottingham Ningbo China); Jenyu Chou (School of Economics, University of Nottingham Ningbo China); Ian Gregory-Smith (Department of Economics, University of Sheffield, UK); Alberto Montagnoli (Department of Economics, University of Sheffield, UK) |
| Abstract: | This paper examines the causal relationship between banking competition and financial stability. We find that an exogenous competition shock significantly improved the stability of banks, consistent with the ‘competition-stability hypothesis’. We show that banks improved their cost efficiency and reduced credit risks in response to U.S. banking deregulation. In addition, we show the competition shock had a larger impact on banks who were initially operating in a less competitive environment. Our findings provide the first quasi-natural experimental evidence on the non-linear relationship between bank competition and financial stability. |
| Keywords: | Bank Competition, Bank Risk, Financial Stability, Banking Deregulation |
| JEL: | G18 G20 G21 G28 |
| Date: | 2020–04 |
| URL: | http://d.repec.org/n?u=RePEc:shf:wpaper:2020003&r=all |
| By: | Diana Bonfim; Geraldo Cerqueiro; Hans Degryse; Steven Ongena |
| Abstract: | Banks may have incentives to continue lending to “zombie” firms in order to avoid or delay the recognition of credit losses. In spite of growing regulatory pressure, there is evidence that “zombie lending” remains widespread, even in developed countries. We exploit information on a unique series of authoritative on-site inspections of bank credit portfolios in Portugal to investigate how such inspections affect banks’ future lending decisions. We find that following an inspection a bank becomes up to 9 percentage points less likely to refinance a firm with negative equity, implying a halving of the unconditional refinancing probability. Hence, banks structurally change their lending decisions following on-site inspections, suggesting that – even in the age of reg-tech – supervisory “reg-leg” can remain a potent tool to tackle zombie lending. |
| JEL: | G21 G32 |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:ptu:wpaper:w202001&r=all |
| By: | Bubeck, Johannes; Maddaloni, Angela; Peydró, José-Luis |
| Abstract: | We show that negative monetary policy rates induce systemic banks to reach-for-yield. For identification, we exploit the introduction of negative deposit rates by the European Central Bank in June 2014 and a novel securities register for the 26 largest euro area banking groups. Banks with more customer deposits are negatively affected by negative rates, as they do not pass negative rates to retail customers, in turn investing more in securities, especially in those yielding higher returns. Effects are stronger for less capitalized banks, private sector (financial and non-financial) securities and dollar-denominated securities. Affected banks also take higher risk in loans. JEL Classification: E43, E52, E58, G01, G21 |
| Keywords: | banks, negative rates, non-standard monetary policy, reach-for-yield, securities |
| Date: | 2020–04 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbwps:20202398&r=all |
| By: | Giorgio Albareto (Bank of Italy); Andrea Cardillo (Bank of Italy); Andrea Hamaui (Harvard University); Giuseppe Marinelli (Bank of Italy) |
| Abstract: | The paper investigates how the characteristics of the distribution network and the affiliation to a banking group affect mutual funds performance exploiting a unique dataset with extremely detailed information on funds’ portfolios and bank-issuer relationships for the period 2006-2017. We find that bank-affiliated mutual funds underperform independent ones. The structure of the distribution channels is a key-factor affecting mutual funds' performance: when bank platforms become by far the prevalent channel for the distribution of funds’ shares, asset management companies are captured by banks. As for bank affiliation, results show a positive bias of bank-controlled mutual funds towards securities issued by their own banking group clients (of the lending and investment banking divisions) and by institutions belonging to their own banking group; this last bias is exacerbated for mutual funds belonging to undercapitalized banking groups. The structure of the distribution channels explains two thirds of bank-affiliated mutual funds underperformance, whereas investment biases explain one fourth of the observed differential in returns with independent mutual funds. |
| Keywords: | mutual funds, mutual funds performance, distribution networks, conflict of interest |
| JEL: | G23 G21 G11 G32 |
| Date: | 2020–04 |
| URL: | http://d.repec.org/n?u=RePEc:bdi:wptemi:td_1272_20&r=all |
| By: | Zoe Venter |
| Abstract: | In this paper, an index of domestic macroprudential policy tools is constructed and the effectiveness of these tools in controlling credit growth is studied using a dynamic panel data model for the period between 2000 and 2017. The empirical analysis includes two panels namely an EU panel of 27 countries and a Latin American panel of 7 countries, and the paper also looks at a case study of Chile, Colombia, Japan, Portugal and the UK. Our main results find that the cumulative index of macroprudential policy tools does not have a statistically significant impact on credit growth when considering a panel of 27 EU countries. When considering the case of Japan, a tighter capital conservation buffer leads to a decrease in the credit supply. When looking at a panel of 7 Latin American countries, our main results show that a tightening of the capital conservation buffer results in an increase in the credit supply. A tightening of the loan-to-value ratio results in a decrease in the credit supply in the panel of 7 Latin American countries. Lastly, a tightening in the overall macroprudential policy tool stance results in a decrease in credit supply in Japan and an increase in credit supply in Portugal. |
| Keywords: | Macroprudential Policy, Credit Booms, Capital Flows, Financial Stability, Systematic Risk, EU, Latin America |
| JEL: | E58 F55 G01 |
| Date: | 2020–04 |
| URL: | http://d.repec.org/n?u=RePEc:ise:remwps:wp01232020&r=all |
| By: | Kévin Spinassou (LC2S - Laboratoire caribéen de sciences sociales - CNRS - Centre National de la Recherche Scientifique - UA - Université des Antilles); Carole Haritchabalet (CATT - Centre d'Analyse Théorique et de Traitement des données économiques - UPPA - Université de Pau et des Pays de l'Adour); Laetitia Lepetit (LAPE - Laboratoire d'Analyse et de Prospective Economique - GIO - Gouvernance des Institutions et des Organisations - UNILIM - Université de Limoges) |
| Abstract: | Given recent regulatory changes under Basel III, we empirically examine the impact of leverage ratio and risk-based capital requirements on bank risk taking and lending, allowing for different degrees of supervisory strength. Using data for 66 countries covering the period 2000-2014, we find that banks in countries with a leverage ratio restriction grant fewer loans and have higher credit risk compared to banks facing no leverage ratio requirement, independently of the strength of the supervisory regime. We further find that those negative side-effects of leverage ratio requirements on bank lending and credit risk are not offset by higher capital stringency. |
| Abstract: | Suite aux récentes réformes de la réglementation bancaire, nous analysons empiriquement l'impact d'un ratio de levier couplé à un ratio de capital pondéré du risque sur l'offre de crédit et la prise de risque des banques. Cette analyse prend en considération les différents degrés d'implication des superviseurs nationaux. Avec une base de données sur 66 pays couvrant la période 2000-2014, nous trouvons que les banques octroient moins de crédit et optent pour davantage de risque dans les pays où un ratio de levier est appliqué, indépendamment de la qualité de la supervision locale. De plus, un meilleur contrôle des fonds propres ne compense pas ces effets négatifs du ratio de levier. |
| Date: | 2020–04–17 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:hal-02546283&r=all |
| By: | Iñaki Aldasoro; Bryan Hardy; Maximilian Jager |
| Abstract: | We study the relationship between bank geographic complexity and risk using a unique dataset of 96 global bank holding companies (BHCs) over 2008-2016. From data on the affiliate network of internationally active banking entities, we construct a measure of geographic coverage and complexity for each BHC. We find that higher geographic complexity heightens banks' capacity to absorb local economic shocks, reducing their risk. However, higher geographic complexity is also associated with a higher vulnerability to global shocks and less impact of prudential regulation, increasing their risk. Geographic complexity helps more (with respect to local shocks) and hurts less (with respect to global shocks) if countries' business cycles are misaligned. Large, international regulatory reforms such as the implementation of the GSIB framework and the European Single Supervisory Mechanism reduce bank risk, but geographic complexity weakens this effect. Bank geographic complexity therefore has a Janus face, decreasing some but increasing other aspects of bank risk. |
| Keywords: | bank geographic complexity, bank risk, bank regulation, GSIB |
| JEL: | G21 G28 |
| Date: | 2020–04 |
| URL: | http://d.repec.org/n?u=RePEc:bis:biswps:858&r=all |
| By: | Sangyup Choi (Yonsei University) |
| Abstract: | Using the bank loan officer surveys from 12 countries, we document a novel cyclical pattern found in bank lending standards and loan demand, which differs between market-based and bank-based economies; in particular, the lending rate fails to reflect the credit market conditions in bank-based economies. Using the Korean economy as an example, we demonstrate the failure of identification of loan supply shocks when relying on the lending rate and propose novel identifying schemes by exploiting the information from the survey. Our findings suggest that disentangling the supply and demand factors of credit shocks is crucial to understand their macroeconomic effects. |
| Keywords: | Bank loan officer survey, Sign-restriction VARs, Bank lending shocks, Credit market disequilibrium, Bank-based economies |
| JEL: | E32 E44 E51 |
| Date: | 2020–04–12 |
| URL: | http://d.repec.org/n?u=RePEc:cth:wpaper:gru_2020_006&r=all |
| By: | Luigi Infante (Bank of Italy); Francesco Vercelli (Bank of Italy) |
| Abstract: | Balance sheet statistics are included in the national accounts system and provide a complete framework for analysing the wealth of a nation and its evolution over time. The paper presents Italian balance sheets, compiled using data on financial accounts produced by the Bank of Italy and non-financial asset data calculated by Istat, the Italian National Institute of Statistics. We provide stylized facts on the comparison between Italy and other major economies, taking into account the statistical comparability limits on non-financial assets across countries. In Italy, the ratio of non-financial assets to gross wealth increased from 43 to 47 per cent between 2005 and 2008 because of the dynamics of housing prices. It then gradually decreased from 2012, reaching 41 per cent at the end of 2017. The net wealth of Italian households far outweighs the negative values reported in the public sector. The ratio of net wealth to income is high in Italy compared with other countries; nevertheless, the gap has narrowed over the last decade. |
| Keywords: | Balance sheet statistics, sector wealth |
| JEL: | E01 E21 E22 |
| Date: | 2020–04 |
| URL: | http://d.repec.org/n?u=RePEc:bdi:opques:qef_559_20&r=all |
| By: | Mathias Drehmann; Marc Farag; Nicola Tarashev; Kostas Tsatsaronis |
| Abstract: | By allowing banks to run down some of their buffers, policymakers are sending a strong signal about their resolve to lessen the economic fallout from the pandemic. Such prudential measures complement the main policy levers: monetary and fiscal instruments. To avoid a reduction in credit to the real economy, authorities need to ensure that banks have the capacity and willingness to make use of the flexibility afforded by the buffer release. Payout restrictions on banks and risk-sharing between banks and the public sector will be key. r banks to continue playing a positive role in the supply of funding during the recovery, they should maintain usable buffers for a long period, as losses from a severe recession will take time to materialise. |
| Date: | 2020–04–24 |
| URL: | http://d.repec.org/n?u=RePEc:bis:bisblt:9&r=all |
| By: | Thomas B. King; Travis D. Nesmith; Anna L. Paulson; Todd Prono |
| Abstract: | By stepping between bilateral counterparties, a central counterparty (CCP) transforms credit exposure. CCPs generally improve financial stability. Nevertheless, large CCPs are by nature concentrated and interconnected with major global banks. Moreover, although they mitigate credit risk, CCPs create liquidity risks, because they rely on participants to provide cash. Such requirements increase with both market volatility and default; consequently, CCP liquidity needs are inherently procyclical. This procyclicality makes it more challenging to assess CCP resilience in the rare event that one or more large financial institutions default. Liquidity-focused macroprudential stress tests could help to assess and manage this systemic liquidity risk. |
| Keywords: | Financial systems; Central counterparties; CCPs; Margin; Liquidity risk; Systemic risk; Financial stability; Procyclicality |
| JEL: | E58 G21 G23 G28 N22 |
| Date: | 2020–01–31 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedgfe:2020-09&r=all |
| By: | Stefan Avdjiev; Egemen Eren; Patrick McGuire |
| Abstract: | Since the start of the Covid-19 pandemic, indicators of dollar funding costs in foreign exchange markets have risen sharply, reflecting both demand and supply factors. The demand for dollar funding has grown in recent years, reflecting the currency hedging needs of corporates and portfolio investors outside the United States. Against this backdrop, the financial turbulence of recent weeks has crimped the supply of dollar funding from financial intermediaries, sharply lifting indicators of dollar funding costs. These costs have narrowed after central banks deployed dollar swap lines, but broader policy challenges remain in ensuring that dollar funding markets remain resilient and that central bank liquidity is channelled beyond the banking system. |
| Date: | 2020–04–01 |
| URL: | http://d.repec.org/n?u=RePEc:bis:bisblt:1&r=all |
| By: | Raphael Auer; Giulio Cornelli; Jon Frost |
| Abstract: | The Covid-19 pandemic has fanned public concerns that the coronavirus could be transmitted by cash. Scientific evidence suggests that the probability of transmission via banknotes is low when compared with other frequently-touched objects, such as credit card terminals or PIN pads. To bolster trust in cash, central banks are actively communicating, urging continued acceptance of cash and, in some instances, sterilising or quarantining banknotes. Some encourage contactless payments. Looking ahead, developments could speed up the shift toward digital payments. This could open a divide in access to payments instruments, which could negatively impact unbanked and older consumers. The pandemic may amplify calls to defend the role of cash - but also calls for central bank digital currencies. |
| Date: | 2020–04–03 |
| URL: | http://d.repec.org/n?u=RePEc:bis:bisblt:3&r=all |
| By: | Stéphane Lhuissier; Benoît Mojon; Juan Rubio-Ramírez |
| Abstract: | The liquidity trap is synonymous with ineffective monetary policy. The common wisdom is that, as the short-term interest rate nears its effective lower bound, monetary policy cannot do much to stimulate the economy. However, central banks have resorted to alternative instruments, such as QE, credit easing and forward guidance. Using state-ofthe-art estimates of the effects of monetary policy, we show that monetary easing stimulates output and inflation, also during the period when short-term interest rates are near their lower bound. These results are consistent across the United States, the euro area and Japan. |
| Date: | 2020–04 |
| URL: | http://d.repec.org/n?u=RePEc:fda:fdaddt:2020-04&r=all |
| By: | Pierluigi Murro (LUISS-Guido Carli University.); Tommaso Oliviero (University of Naples Federico II and CSEF); Alberto Zazzaro (University of Naples Federico II, CSEF and MoFiR) |
| Abstract: | Using firm-level survey information, we investigate whether relationship lending affects firms' employment decisions when they experience negative shocks on sales. We find that firms maintaining long-lasting relationships with their main bank show a significantly lower sensitivity of employment growth rate to shocks in sales. This result is robust to measurement issues and to an instrumental variable strategy, and is stronger for young, small, human-capital-intensive firms. Our findings indicate that relationship lending acts as an insurance for firms' employees against adverse sales fluctuations, especially for firms whose internal workforce is more valuable and is thus substitutable at larger costs. |
| Keywords: | employment, relationship banking, insurance |
| JEL: | G32 G38 H53 J65 |
| Date: | 2020–04 |
| URL: | http://d.repec.org/n?u=RePEc:anc:wmofir:160&r=all |
| By: | Guowei Cui; Vasilis Sarafidis; Takashi Yamagata |
| Abstract: | The present paper develops a new Instrumental Variables (IV) estimator for spatial, dynamic panel data models with interactive effects under large N and T asymptotics. For this class of models, the only approaches available in the literature are based on quasi-maximum likelihood estimation. The approach put forward in this paper is appealing from both a theoretical and a practical point of view for a number of reasons. Firstly, the proposed IV estimator is linear in the parameters of interest and it is computationally inexpensive. Secondly, the IV estimator is free from asymptotic bias. In contrast, existing QML estimators suffer from incidental parameter bias, depending on the magnitude of unknown parameters. Thirdly, the IV estimator retains the attractive feature of Method of Moments estimation in that it can accommodate endogenous regressors, so long as external exogenous instruments are available. The IV estimator is consistent and asymptotically normal as N, T → ∞, with N/T^2 → 0 and T /N^2 → 0. The proposed methodology is employed to study the determinants of risk attitude of banking institutions. The results of our analysis provide evidence that the more risksensitive capital regulation that was introduced by the Basel III framework in 2011 has succeeded in influencing banks' behaviour in a substantial manner. |
| Keywords: | Panel data, instrumental variables, state dependence, social interactions, common factors, large N and T asymptotics |
| JEL: | C33 C36 C38 C55 |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:msh:ebswps:2020-11&r=all |
| By: | Luciano Lavecchia (Bank of Italy); Luigi Leva (Bank of Italy); David Loschiavo (Bank of Italy) |
| Abstract: | The Italian public guarantee scheme (Fondo di garanzia - FDG) is the main tool supporting SMEs’ access to credit. This work evaluates the impact of the regional laws limiting the FDG’s operations to loans guaranteed by mutual guarantee institutions. To this end, we exploit the regulations’ discontinuities that occurred in some Italian regions that have either abolished or introduced such a restriction. We study the effects of the regulation changes in a difference-in-differences setting where treated firms are located in regime switching regions and control firms are in neighbouring regions. We find that constraining access to the FDG’s publicly funded collateral to counter-guarantee schemes hampered SMEs’ access to finance overall. Removing the restriction increased both the number of firms with access to the FDG’s guarantees and the total size of the loans granted to treated SMEs of any size. Moreover, the relative cost of credit improved for treated firms. Conversely, the introduction of the restriction to counter-guarantees had mostly negative effects on the number, size and cost of loans granted to treated firms. |
| Keywords: | access to credit, public guarantees, mutual guarantee institutions |
| JEL: | H81 G21 |
| Date: | 2020–04 |
| URL: | http://d.repec.org/n?u=RePEc:bdi:opques:qef_558_20&r=all |
| By: | Anastasiou, Dimitrios; Giannoulakis, Stelios |
| Abstract: | This study contributes to the literature of expectation formation mechanisms by bringing new evidence on how non-financial corporations shape their expectations on the availability of external finance. We link consecutive surveys from the Survey on the Access to Finance of Enterprises to investigate which expectation formation mechanism governs Eurozone firms regarding their expectations on the availability of external finance. In line with the past literature, we demonstrate that the Rational Expectations hypothesis is rejected by the data and we find evidence in favor of the Adaptive Expectation mechanism. |
| Keywords: | non-financial corporations; survey‐based expectations; expectation formation mechanisms; bank finance |
| JEL: | D0 D00 |
| Date: | 2020–04 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:99890&r=all |