A simple enquiry on heterogeneous lending rates and lending behaviour

and inequalities among different regions. A great deal of this research has been performed by economists
from the Research Department of the Bank of Italy and published on “Temi di Discussione”, a publication
from the Research Department of the Bank of Italy (for instance, Angeloni et al., 1995, Baffigi et al.,
1999, Buttiglione et al., 1994, Cottarelli et al., 1997, De Bonis et al., 1997, Focarelli et al, 1998, Rinaldi
Russo et al, 1999), which, apart from being a prestigious Italian research institution, enjoys a privileged
access to the generality of individual banking data for research purpose while guaranteeing, at the same
time, strict confidentiality of the data, according to the existing regulations. Angeloni et al. (1995), by
performing impulse response functions with aggregate time-series data referred to different size classes of
banks show (for the sample period from 1987,1 to 1993, 12) that large-size banks tend to raise their
lending rates more than small banks in periods of tight money and associate this phenomenon to
monopoly power in local markets and customer relationships. Surprisingly they also find that the impact
of monetary policy seems to be stronger in large companies than in the smaller ones, due, again, to the
peculiar kind of customer relationships existing in local credit markets. Apart from these peculiar results,
Angeloni et al. obtain evidence consistent with the credit view: the interbank market is weakly exogenous
to the bond market, the interbank and bond market are weakly exogenous to the loan and deposit markets,
and, similarly to the results by Buttiglione and Ferri (1994), the spread between bank loan and long term
Government bond is influenced by the fact that lending rates tend to overshoot bond market rates. A
certain influence on this kind of literature has been played by Cottarelli and Kourelis (1994) methodology
in analysing how the degree of stickiness of bank rates varies significantly from country to country.
Cottarelli and Kourelis also find that interest rates stickiness does not seem to be affected by the credit
market structure. Cottarelli et al. (1997), after a detailed analysis of Italian structural data for the banking
sector, apply Cottarelli and Kourelis (1994) methodology to analyze the degree of stickiness of the interest
rates in various Italian provinces, by taking into consideration the possible non-stationarity of lending
rates and using individual bank data. Again, like Cottarelli and Kourelis (1994), they find that Italian
lending rates are indeed very sticky. Significant differences in the amount of bad debts among different
geographic areas are found by De Bonis and Ferrando (1997), who also show that the lending rates in the
different Italian provinces are higher the more concentrated are the credit markets, the higher the market
shares of the largest banks, the more risky each single credit intermediary and the higher the bank
operational costs. Focarelli and Rossi (1998) estimate with cointegration techniques a bank credit demand
function (which is assumed to depend negatively on the cost of bank credit and operational cash flow, and
positively on the firms’ investments and on an alternative interest rate) which turns out to be very stable
even in times of deep and frequent institutional changes. On the other hand, more difficult and subject to
different heterogeneous influences seems to be the demand for bank credit in the various Italian region:
for instance, in the North-East, real variables seem to determine a strong effect, while elasticity with

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