In this article, we empirically analyse the factors which determined consumer
credit in Greece in the period before and after the financial liberalization, while
accounting for significant changes in structure due to the lifting of credit restrictions
and the subsequent impressive boom of consumer loans. We use multivariate
cointegration techniques to estimate a vector error correction model
(VECM) and identify separate demand and supply relationships for consumer
loans. We introduce demand and supply-related shifts in parameters through the
inclusion of appropriate dummy variables and trends in the long-run relationships.
We partly deviate from the typical Johansen procedure and estimate the
model in two steps. We find that the theoretical exclusion and coefficient-size
restrictions on the demand and supply cointegrating vectors are valid. Our results
are consistent with the operation of a bank lending channel in Greece. We also
find that the supply side was mostly responsible for the acceleration of consumer
loan growth following credit liberalization.