Due to the unobservability of the new credit production, most of the empirical loan market studies use, instead, the observable credit stock. This substitution has been pointed out to be likely to generate biases (e.g. see Lown and Peristiani (1996)). In this paper, we show that under quite unrestrictive conditions, this substitution does not lead to biased estimates of any log-log model coefficients, as long as banks panel data is used and fixed effects are included in the estimated equation.
Classification JEL : E5, C23
Updated on: 06/12/2018 11:09