Even though the estimated coefficients of lt and st do not seem to be much different
in absolute terms, the null hypothesis of their being equal in magnitude (the “spread
condition”) is statistically rejected. In fact the t-statistics for this restriction are always
larger than two (see, bottom line of Table 5). Thus, we proceed without imposing such
restriction in the estimated loan-supply equations.
Given that the coefficient of ln(D/ P) , α1 , is significantly positive and the
coefficient of lt , α3 , is finite we conclude that there is evidence of the existence of a
credit channel in the transmission of monetary policy in Portuguese bank data. However
the coefficient of lt (and also the coefficient of st ) appears to be somewhat high and we
have seen that a high interest rate elasticity of credit supply reduces the importance of the
credit channel.
By comparing the results in columns (1) and (2) we also see that the conclusion on
the existence of the credit channel does not depend on whether or not the estimated
regression includes bank capital as an additional regressor.
The remaining equations in Table 5 interact the explanatory variables in our basic
equation with three bank specific characteristics, which we see as potential important
sources of bank heterogeneity: size, liquidity and capitalisation. In the table these three
variables are denoted by zit . Our general formulation in this case reads as
ln(C / P)st = βθi + βιln(D∕P)it + β2ln(D∕P)it zit + β3ln(K / P)it + β4ln(K/P)it zit
+β5lt+β6ltzit+β7st+β8stzit+β9πt+β10zit (7.2)
where interactions appear in all the potentially relevant variables.
In the case of size and capitalisation the Zit variable is taken in the form of
differences from each time period average, i.e.,
1N
zit = χtt - N ∑ χtt = x- xt (7.3)
i1
case if our specified equation is not stable in the 6-dimensional space defined by
[ln(C / P),ln(D / P),ln(K / P),l,s,π]. In turn, this instability is likely to occur if some relevant decision
variable is missing in our estimated equation. However, the possibility of we being estimating a demand
equation instead of a supply equation is completely out of the question, given the signs of the estimated
coefficients.
27
More intriguing information
1. PACKAGING: A KEY ELEMENT IN ADDED VALUE2. The name is absent
3. Strategic Planning on the Local Level As a Factor of Rural Development in the Republic of Serbia
4. The name is absent
5. TWENTY-FIVE YEARS OF RESEARCH ON WOMEN FARMERS IN AFRICA: LESSONS AND IMPLICATIONS FOR AGRICULTURAL RESEARCH INSTITUTIONS; WITH AN ANNOTATED BIBLIOGRAPHY
6. Bargaining Power and Equilibrium Consumption
7. SOCIOECONOMIC TRENDS CHANGING RURAL AMERICA
8. Name Strategy: Its Existence and Implications
9. he Virtual Playground: an Educational Virtual Reality Environment for Evaluating Interactivity and Conceptual Learning
10. WP 92 - An overview of women's work and employment in Azerbaijan