Bulgarian National Bank
Date Published | 2008 |
Version | |
Primary Author | Michael Frömmel |
Other Authors | Kristina Karagyozova |
Theme | |
Country | Bulgaria |
We examine the dynamics of bank lending to companies and private households in Bulgaria by applying a non-linear Markov switching error correction model (MS-ECM). The MS-ECM provides evidence for multiple structural breaks and improves the estimation results compared to a linear model. In particular we find a more or less pronounced, time-varying relation between bank lending and asset prices. We identify periods when corporate and household loans were driven to a greater extent by supply-side rather than long-run demand-side factors. We also find evidence for a regime switch due to the introduction of administrative measures to curb the credit expansion in early 2005.