This paper examines how credit risk affects bank lending and the business cycle. We estimate a panel Vector …, inflation, the short-term interest rate, bank lending, as well as loan loss provisioning by banks (as proxy for credit risk …). Our main findings are that: (i) bank lending and loan loss provisioning are important drivers of business cycle …

on bank lending. We focus on aggregated macroprudential policy measures and on individual instruments and test whether … their effect on the association between lending and capital depends on bank size. Applying the GMM 2-step Blundell and Bond … of capital on bank lending during both crisis and non-crisis times. This result is stronger in large banks than in other …