by Thibaut Dupreya
This paper investigates the lending pattern of state-owned banks over the business cycle. I take the endogeneity of public banking into account by including records on both privatizations and nationalizations during banking crises. I find that public bank lending is (i) significantly less cyclical except for low-income countries, (ii) asymmetric along the business cycle, (iii) heterogeneous across stages of economic development, and (iv) related to banks' vulnerability on their funding side. Public banks reduce their lending less during economic downturns, but their ability to absorb negative shocks is marginally decreasing as the size of the shock increases.
JEL Codes: G21, G28, G32, H44.
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a Paris School of Economics and Banque de France