P. Zhang and D.-j. Kong (PR China)
Modelling, Time Series Analysis, Bank loans, Stock prices
This paper analyses whether the stock prices would influence bank loans in China. Using the empirical analysis based on MS-ECM and MS-VECM, we find that stock prices can influence loan volume in some short period. And the finding from VECM shows that the interaction of output and loan volume could increase the persistence of stock prices shock. This link between stock prices and bank loans might amplify financial fluctuations in China. We also find that stock prices could influence bank loans not only after their dramatic drops as some western scholars found, but also could influence loan volume after their dramatic growth. This result gives us some information about the transmission channels of stock prices shock.
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