LENDING BEHAVIOUR AND CREDIT RATIONING IN BARBADOS: A REGIME SWITCHING MODEL

Author(s): CRAIGWELL, ROLAND; KAIDOU-JEFFEREY, DONNA; (2010)

Created 26 Jul, 2010
Categories Working Papers Roland Craigwell Special Collection
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This paper uses a regime-switching model to assess total and sectoral commercial bank lending behaviour in an environment of credit rationing and non-credit rationing in Barbados. The results indicate that in a credit rationed regime banks reduce lending. The periods of credit rationing determined are periods of uncertainty following global recessions. This indicates that banks exercise caution in their lending behaviour and are risk averse in an environment of uncertainty. All the real economic sectors, tourism, construction, manufacturing and agriculture, are affected except distribution. The paper seeks to inform individual policy makers and business personnel.

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