Title: Disentangling the effect of supply and demand factors on bank lending. Evidence from Bank Lending Survey in Azerbaijan

Serial number: 02/2021

Author(s): Ilkin Huseynov, Zubeyda Imanova, Hikmat Valirzayev

Language: English

Date: 2021

Abstract: This paper examines the role of supply and demand conditions in bank lending using data from the Bank Lending Survey (BLS) in Azerbaijan. Results suggest that both supply and demand factors play an important role in credit growth rate. The estimated impact of softening in credit conditions on the quarter-on-quarter consumer lending growth rate ranges between 0.14 and 0.21 percentage points while the effect of the decrease in demand is found to range between -0.24 and -0.34 percentage points, depending on the specifications. Results remain to be robust to the introduction of various control variables, time dummies, and different specifications. We further compare results for systematically important (SI) banks and others (NSI) and find that the effect is asymmetric for different bank groups.

Key words: Bank Lending Survey, panel data, credit growth, supply tightening

JEL classification: E30, E32, E52, G21

Disentangling the effect of supply and demand factors on bank lending. Evidence from Bank Lending Survey in Azerbaijan

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