A simple enquiry on heterogeneous lending rates and lending behaviour



4. Concluding remarks

This paper contains an empirical investigation on the various potential sources of heterogeneity in
Italian bank lending rates, according to the lender size, the size class of bank loans, and the geographic
area, for a period of observation going from 1990QI to 1998QIV, using a data set specifically acquired
from the Bank of Italy.

The first econometric analysis investigates the behaviour of the spread between the lending rate
(from each size class of lenders to each size class of loans in each of the six areas, in the estimating
period) and the monetary policy rate, since in this context, the amount of the spread might be interpreted
as a diversified and heterogeneous reaction to a given “policy measure”, such as indicated by monetry
policy interest rate. While the preliminary descriptive statistical analysis seems to show a clear and
persistent negative correlation between the class sizes of bank loans and the level of lending rates, the
econometric analysis shows that this correlation can be well explained by more conventional theoretical
variables, such as the borrower-specific risk and a proxy for the relative bargaining power between lender
and borrower. Like in other Italian contributions on this kind of literature, it is also found, for some
geographic areas of the country, a persistently higher level of lending rates, while the significance of
dummies for the lenders size is more dubious and the dummies for the loan size classes are certainly not
significant

. The last empirical analysis finally identifies an interesting source of heterogeneity in the fact that
that the share of loans to the largest size group acts consistently with a “demand-determined” behaviour.

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