Macroeconomic Effects of Loan Supply Shocks: Empirical Evidence for Peru


  • Jefferson Martí­nez Pontificia Universidad Católica del Perú and Central Reserve Bank of Peru
  • Gabriel Rodrí­guez Pontificia Universidad Católica del Perú


Banking System, Loan Supply Shock, Bayesian Autoregressive Vector Model, Sign Restrictions, Peruvian Economy


This paper quantifies and assesses the impact of an adverse loan supply (LS) shock on Peru's main macroeconomic aggregates using a Bayesian vector autoregressive (BVAR) model in combination with an identification scheme with sign restrictions. The main results indicate that an adverse LS shock: (i) reduces credit and real GDP growth by 372 and 75 basis points in the impact period, respectively; (ii) explains 11.2% of real GDP growth variability on average over the following 20 quarters; and (iii) explained a 180-basis point fall in real GDP growth on average during 2009Q1-2010Q1 in the wake of the Global Financial Crisis (GFC). Additionally, the sensitivity analysis shows that the results are robust to alternative identification schemes with sign restrictions; and that an adverse LS shock has a greater impact on non-primary real GDP growth.


Atta-Mensah, J., and Dib, A. (2008), “Bank lending, credit shocks, and the transmission of Canadian monetary policy,†International Review of Economics and Finance 17(1), 159-176.

Ba´nbura, M., Giannone, D., and Riechlin, L. (2008), “Large Bayesian VARs,†European Central Bank, Working Paper 966.

Bernanke, B. S., and Blinder, A. S. (1988), “Credit, money, and aggregate demand,†National Bureau of Economic Research WP 2534.

Bernanke, B. S., Gertler, M., and Gilchrist, S. (1996), “The flight to quality and the financial accelerator,†Review of Economics and Statistics 78(1), 1-15.

Bernanke, B. S., Gertler, M., and Gilchrist, S. (1999), “The financial accelerator in a quantitative business cycle framework,†Handbook of Macroeconomics 1, 1341-1393.

Busch, U., Scharnagl, M., and Scheithauer, J. (2010), “Loan supply in Germany during the financial crisis,†Discussion Paper Series 1: Economic Studies 5/2010.

Canova, F. (2011). Methods for Applied Macroeconomic Research. Princeton: Princeton University Press.

Canova, F., and Paustian, M. (2011). “Business cycle measurement with some theory,†Journal of Monetary Economics 58(4), 345-361.

Castillo, P., and Salas, J. (2010), “Los términos de intercambio como impulsores de fluctuaciones económicas en economías en desarrollo: Estudio empíricoâ€, Centro de Estudios Monetarios Latinoamericanos, Premio de Banca Central Rodrigo Gómez.

Cúrdia, V., and Woodford, M. (2010), “Credit spreads and monetary policy,†Journal of Money, Credit and Banking 42(6), 3-35.

Dancourt, O. (2012), “Crédito bancario, tasa de interés de política y tasa de encaje en el Perúâ€, Departamento de Economía, Pontificia Universidad Católica del Perú, Working Paper 342.

De Bond, G. J. (2005), “Interest rate pass-through: empirical results for the Euro Area,†German Economic Review 6(1), 37-78.

Espino, F. (2013), “Hechos Estilizados del Sistema Bancario Peruanoâ€, Banco Central de Reserva del Perú WP 2013-005.

Faust, J., and Leeper, E. M. (1997), “When do long-run identifying restrictions give reliable results?â€, Journal of Business and Economic Statistics 15(3), 345-353.

Fry, R., and Pagan, A. (2011), “Sign restrictions in structural vector autoregressions: A critical review,†Journal of Economic Literature 49(4), 938-60.

Gambetti, L., and Musso, A. (2017), “Loan supply shocks and the business cycle,†Journal of Applied Econometrics 32(4), 764-782.

Gerali, A., Neri, S., Sessa, L., and Signoretti, F. M. (2010), “Credit and Banking in a DSGE Model of the Euro Area,†Journal of Money, Credit and Banking 42(6), 108-141.

Gertler, M., and Karadi, P. (2011), “A model of unconventional monetary policy,†Journal of Monetary Economics 58(1), 17-34.

Gilchrist, S., Ortiz, A., and Zakrajsek, E. (2009), “Credit Risk and the Macroeconomy: Evidence from an Estimated DSGE Model,†Unpublished manuscript, Boston University.

Goodfriend, M., and McCallum, B. T. (2007), “Banking and interest rates in monetary policy analysis: A quantitative exploration,†Journal of Monetary Economics 54(5), 1480-1507.

Groen, J. J. J. (2004), “Corporate Credit, Stock Price Inflation and Economic Fluctuations,†Applied Economics 36(18), 1995-2006.

Guevara, C. and Rodríguez, G. (2018), “The Role of Loan Supply Shocks in Pacific Alliance Countries: A TVP-VAR-SV Approach,†Working Paper 467, Department of Economics, Pontificia Universidad Católica del Perú.

Hristov, N., Hülsewig, O., and Wollmershäuser, T. (2012). “Loan supply shocks during the financial crisis: Evidence for the Euro area,†Journal of International Money and Finance 31(3), 569-592.

Kadiyala, K. R. and Karlsson, S. (1997), “Numerical methods for estimation and inference in Bayesian VAR-models,†Journal of Applied Econometrics 12(2), 99-132.

Kiyotaki, N., and Moore, J. (1997), “Credit cycles,†Journal of Political Economy 105(2), 211-248.

Koop, G., and Korobilis, D. (2010). “Bayesian multivariate time series methods for empirical macroeconomics,†Foundations and Trends in Econometrics 3(4) 267-358.

Litterman, R. B. (1986), “Forecasting with Bayesian vector autoregressions - five years of experience,†Journal of Business and Economic Statistics 4(1), 25-38.

Musso, A., Neri, S., and Stracca, L. (2011), “Housing, consumption and monetary policy: How different are the US and the euro area?â€, Journal of Banking and Finance 35(11), 3019-3041.

Ng, S. and Perron, P. (1995), “Unit Root tests in ARMA Models with Data Dependent Methods for the Selection of the truncation Lag,†Journal of the American Statistical Association 90, 268-281.

Ng, S. and Perron, P. (2001), “Lag Length Selection and the Construction of Unit Root Tests with Good Size and Power,†Econometrica 69, 1519-1554.

Nolazco, J. L., Lengua-Lafosse, P., and Céspedes N. (2016), “Contribución de los choques externos en el Crecimiento Económico del Perú: un modelo semi-estructuralâ€, Banco Central de Reserva del Perú WP 2016-006.

Paustian, M. (2007), “Assessing sign restrictions,†The BE Journal of Macroeconomics 7(1) Article 23.

Peersman, G. (2005), “What caused the early millennium slowdown? Evidence based on vector autoregressions,†Journal of Applied Econometrics 20(2), 185-207.

Peersman, G., and Straub, R. (2006), “Putting the New Keynesian Model to a Test,†IMF Working Papers 06/135.

Pérez-Forero, F. and Vega, M. (2014), “The Dynamic Effects of Interest Rates and Reserve Requirementsâ€, Banco Central de Reserva del Perú WP 2014-018.

Rodríguez, G., Villanueva, P. and Castillo Bardalez, P. (2018), “Driving Economic Fluctuations in Peru: The Role of the Terms of Trade,†Empirical Economics 55(3), 1089-1119.