Credit Crunch in Germany?

This paper evaluates whether the Germany economy is currently affected by a credit crunch, i.e. a supply-side restriction of loans that is not in line with market interest rates and profitability of investment projects. With help of a disequilibrium-model, we calculate a credit supply and a demand-function. We compare estimated demand with estimated supply, finding a considerable excess-demand particularly in the second half of 2002. The main reason for this restriction is the drop in earnings in the banking sector. Applying the model to Grossbanken (big banks) and other credit institutions separately, shows that the situation in the former is more severe than in the latter