Bank lending surveys and financial cycles

• Název práce v češtině: Bank lending surveys and financial cycles
• Název v anglickém jazyce: Bank lending surveys and financial cycles
• Akademický rok vypsání: 2015/2016
• Typ práce: diplomová práce
• Jazyk práce: angličtina
• Ústav: Institut ekonomických studií (23-IES)
• Vedoucí / školitel: doc. PhDr. Adam Geršl, Ph.D.
• Řešitel: skrytý - zadáno vedoucím/školitelem
• Datum přihlášení: 16.06.2016
• Datum zadání: 16.06.2016
• Datum a čas obhajoby: 14.09.2017 08:30
• Místo konání obhajoby: Opletalova - Opletalova 26, O206, Opletalova - místn. č. 206
• Datum odevzdání elektronické podoby: 31.07.2017
• Datum proběhlé obhajoby: 14.09.2017
• Oponenti: PhDr. Michal Hlaváček, Ph.D.

Zásady pro vypracování

Outline:
1. Introduction
2. Data, Descriptive Statistics and Methodology
3. Financial Cycle and Its Indicators (creation, theoretical background)
4. BLS as an Early Warning System
5. Predictive Analytics
6. Conclusion

Seznam odborné literatury

Alessi, Lucia, Antonio Antunes, Jan Babecký, Simon Baltussen, Markus Behn, Diana Bonfim, Oliver Bush et al., 2015, Comparing different early warning systems: Results from a horse race competition among members of the Macro-prudential Research Network, MPRA Paper No. 62194, European System of Central Banks.

Altunbas, Yener, Leonardo Gambacorta, and David Marques-Ibanez, 2010, Bank risk and monetary policy, Journal of Financial Stability 6, 121-129.

Babecký, Jan, Tomas Havranek, Jakub Mateju, Marek Rusnák, Katerina Smidkova, and Borek Vasicek, 2012, Banking, debt and currency crises: Early warning indicators for developed countries, Working Paper No. 1485, European Central Bank.

Berg, Jesper, Adrian A. R. J. M. Van Rixtel, Annalisa Ferrando, Gabe De Bondt, and Silvia Scopel, 2005, The bank lending survey for the euro area, Occasional Paper No. 23, European Central Bank.

Borio, Claudio E. V., 2014, The financial cycle and macroeconomics: What have we learnt?, Journal of Banking & Finance 45, 182-198.

Budina, Nina, Borja Gracia, Xingwei Hu, and Sergejs Saksonovs, 2015, Recognizing the bias: Financial cycles and fiscal policy, Working Paper No. 15/246, International Monetary Fund.

De Bondt, Gabe, Angela Maddaloni, José-Luis Peydró, and Silvia Scopel, 2010, The Euro area bank lending survey matters: Empirical evidence for credit and output growth, Working Paper No. 1160, European Central Bank.

Drehmann, Mathias, Claudio E. V. Borio, and Kostas Tsatsaronis, 2012, Characterising the financial cycle: don't lose sight of the medium term!, Working Paper No. 380, Bank for International Settlements.

Drehmann, Mathias, and Mikael Juselius, 2014, Evaluating early warning indicators of banking crises: Satisfying policy requirements, International Journal of Forecasting 30, 759-780.

Ivashina, Victoria, and David Scharfstein, 2010, Bank lending during the financial crisis of 2008, Journal of Financial Economics 97, 319-338.

Poghosyan, Tigran, 2015, How do public debt cycles interact with financial cycles?, Working Paper No. 15/248, International Monetary Fund.

Předběžná náplň práce

Bank lending survey (BLS), a qualitative survey among banks about their lending policies and standards, was developed in a number of advanced countries in late 1990s and early 2000s as a tool to monitor credit market and to gather information regarding credit conditions during individual phases of the business cycle.

While the information included in BLS is vast, its relatively recent introduction has been preventing studies from using the data on lending conditions in the literature on financial cycles and financial crises. In the financial cycle literature, lending conditions are correlated with the phase of the cycle, with (perhaps too) relaxed conditions in booms and too tight conditions in the busts.

So far, this connection has not been very well documented in the literature. This thesis aims to find out, whether there is a good link between BLS data and financial booms/recessions (phases of financial cycle in general), and test whether variables constructed from the BLS data could potentially be used as an early warning indicator to forecast financial crises on top of already established variables such as credit to GDP gap or house price inflation.

Hypotheses:
1. Hypothesis #1: Lending conditions, as documented by BLS, are significantly correlated with financial cycle.
2. Hypothesis #2: BLS data are able to successfully predict future movements in the financial cycle (credit, property prices).
3. Hypothesis #3: Using The constructed variables constructed with BLS data improve are performing better at predicting predictions of financial crisesrecessions when than combined with traditional indicators such as the outputcredit/GDP gap.

BLS data for as many countries as possible around the world will be collected. From the gathered data, multiple indicators of lending conditions will be constructed and compared with credit and property price data which are known to be good proxy variables for movements in the financial cycle. In the case that a significant relationship will be observed, indicator’s predictive power will be tested within various frameworks (regression, signalling approach) and compared vis-à-vis already established variables. Moreover, behaviour of the data around the financial crisis of 2007-08 will be examined more closely.

However, the actual correlation between BLS results and credit values could also be tested (and is important in the context of this thesis), it has already been done in the work of De Bondt et al. (2010). Even though we have much more data now, change in the relationship is not expected.

As there are very few studies on the topic of BLS and its relationship to financial cycles, this thesis would like to create a link between the data gathered by BLS and financial cycle theory as described by Borio (2014). Additionally, the forecasting power of could be used to warn countries about upcoming financial busts.