A credit cycle model with market sentiments

Kubin, Ingrid; Zörner, Thomas O.; Gardini, Laura; Commendatore, Pasquale

doi:10.1016/j.strueco.2019.06.006

Cited by 5 publications

(2 citation statements)

References 31 publications

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“…In particular, the state policy and central banks are important in mitigating the negative impact of the cyclical economic development on the functioning of banking institutions and their effective credit activity. Kubin et al (2019) considered a credit cycle model with market sentiments; that is, how changes in the sentiments of borrowers and creditors shape the instability of the credit market. At the same time, an indispensable role in changing the behavior of these entities is played by the amount of the equity capital, the reduction of which to a critical size forms new http://dx.doi.org/10.21511/pmf.12(1).2023.04 models of behavior of both borrowers and lenders on the credit market.…”

Section: Literature Reviewmentioning

confidence: 99%

Development of the credit market of Ukraine under macroeconomic instability

Dubyna¹,

Popelo

Zhavoronok

et al. 2023

Public and Municipal Finance

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The development of Ukraine’s credit market occurs under periodic economic crises. Available destructive processes inhibit the development of credit relations, negatively affecting the lending of economic entities and restraining the development of the national economy. This study aims to highlight the basic transformations in the development of the credit market of Ukraine, which are formed in macroeconomic instability. The economic development trends in Ukraine were assessed using classical statistical methods. The correlation regression analysis was used to analyze the influence of macroeconomic parameters (exchange rate, average salary, and cost of loans) on the volume of bank lending. The results show that the national economy of Ukraine during 2005–2021 developed in the conditions of periodic macroeconomic instability, and the pre-crisis (an indicator of 2013) parameters of bank lending volumes have not restored within the credit market. The paper stresses the significant impact of the COVID-19 pandemic: in 2020, the volume of bank lending decreased by 10.38 billion USD. Moreover, the econometric analysis of the influence of specific macroeconomic parameters (exchange rate, average salary, and cost of loans) on the development of bank lending in Ukraine demonstrated that the stability of the national currency exerts the greatest influence on the lending processes of economic entities in Ukraine. Its provision in the long term allows the creation of favorable conditions for the credit market functioning after the shock periods. Acknowledgment This study is conducted within the framework of the scientific project “Transformation of the households’ behavior in the financial services market in the context of digitalization” with the support of the Ministry of Education and Science of Ukraine.

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Section: Literature Reviewmentioning

confidence: 99%

Development of the credit market of Ukraine under macroeconomic instability

Dubyna¹,

Popelo

Zhavoronok

et al. 2023

Public and Municipal Finance

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“…Credit spreads are a natural choice for Financial frictions are still assumed exogenous in the work by Matsuyama et al (2016). An extension by Kubin et al (2019) allows for a switching process in financial frictions according to aggregate sentiments in the economy, for which empirical support has been found by Böck and Zörner (2019). I will use the terms belief distortions and belief surprises interchangeably.…”

Section: Introductionmentioning

confidence: 99%

Identification of Non-Rational Risk Shocks

Böck¹

2022

SSRN Journal

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This paper studies how non-rational risk shocks affect the macroeconomy. Using a novel identification design which exploits survey data on expectations of financial executives in the US, I identify non-rational risk shocks via distortions in beliefs. Belief distortions are measured through surprises in beliefs of credit spreads, defined as the difference between subjective and objective forecasts. They are then used as a proxy for exogenous variation in the risk premium. Belief distortions elicit due to overreaction of credit spreads, eventually leading to exaggerated beliefs on financial markets. Results indicate that the constructed shocks have statistically and economically meaningful effects. This has sizeable consequences for the U.S. economy: A positive non-rational risk shock moves credit spreads remarkably while real activity and the stock market decline.

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Dynamic Investigations of an Endogenous Business Cycle Model with Heterogeneous Agents

Bougheas,

Commendatore,

Gardini

et al. 2023

Comput Econ

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We introduce agents’ heterogeneity into a model of endogenous business cycles, in which agents can invest either in ‘good’ projects that contribute to future capital formation, or in ‘bad’ projects without that property. The resulting map involves three distinct regimes, two of which we linearize. Using theoretical results on piecewise linear systems and on border collision bifurcations, we are able to provide a thourough analysis of the dynamics.

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A credit cycle model with market sentiments

Cited by 5 publications

References 31 publications

Development of the credit market of Ukraine under macroeconomic instability

Development of the credit market of Ukraine under macroeconomic instability

Identification of Non-Rational Risk Shocks

Dynamic Investigations of an Endogenous Business Cycle Model with Heterogeneous Agents

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