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Do Free Banks Overexpand in Unison?

Do Free Banks Overexpand in Unison?
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Year:    2002

Author:    Hon Chu, Kam

Credit and Capital Markets – Kredit und Kapital, Vol. 35 (2002), Iss. 1 : pp. 1–18

Abstract

This paper applies the Engle-Granger cointegration framework to test the inconcert overexpansion hypothesis under free banking. The highly unregulated Hong Kong banking system during 1954-66 is examined. The results suggest a long-run relationship between aggregate bank loans and GDP, both in real terms. Furthermore, the error correction model indicates that deviations of bank loans from the long-run relationship were “self-correcting” in the sense that real loans in excess of its long-run equilibrium level in a year were followed by a contraction in the next year and vice versa. The time-series results are reinforced by further examination of individual banks’ loan growth rates. Overall, the findings reject the in-concert overexpansion hypothesis. (JEL E32, E42, E51)

Journal Article Details

Publisher Name:    Global Science Press

Language:    Multiple languages

DOI:    https://doi.org/10.3790/ccm.35.1.1

Credit and Capital Markets – Kredit und Kapital, Vol. 35 (2002), Iss. 1 : pp. 1–18

Published online:    2002-01

AMS Subject Headings:    Duncker & Humblot

Copyright:    COPYRIGHT: © Global Science Press

Pages:    18

Author Details

Hon Chu, Kam

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Section Title Page Action Price
Kam Hon Chu: Do Free Banks Overexpand in Unison?\rTime Series Evidence from Hong Kong, 1954-66 1
I. Introduction 1
II. The Historical and Institutional Backgrounds 4
III. Empirical Evidence 5
IV. Some Further Evidence at the Bank Level 11
V. Stability of the Hong Kong Banking System 12
VI. Conclusion 14
References 15
Summary: Do Free Banks Overexpand in Unison? Time Series Evidence from Hong Kong, 1954-1966 17
Zusammenfassung: Konzertierte Überexpansion in einem freien Bankensystem? Beweis in Form von Zeitreihen für Hongkong, 1954-1966 17
Résumé: Y a-t-il une expansion excessive concertée des banques sous un régime non contrôlé? Evidence de séries chronologiques temporelles de Hong Kong, 1954-1966 17