The Anatomy of a Credit Supply Shock: Evidence from an Internal Credit Market

2012 ◽  
Author(s):  
Jose Maria Liberti ◽  
Jason Sturgess
Keyword(s):  
Credit Market ◽  
Credit Supply ◽  
Supply Shock

The Anatomy of a Credit Supply Shock: Evidence from an Internal Credit Market

2018 ◽  
Vol 53 (2) ◽  
pp. 547-579 ◽  
Author(s):  
José María Liberti ◽  
Jason Sturgess
Keyword(s):  
Credit Rationing ◽  
Financing Constraints ◽  
Lending Relationships ◽  
Lending Channel ◽  
Credit Supply ◽  
Supply Shock ◽  
Level Data ◽  
Channel Effects ◽  
Post Shock ◽  
Micro Level

We investigate how financial contracting interacts with lending-channel effects by tracing the anatomy of a credit supply shock using micro-level data from a multinational bank. Borrowers with stronger lending relationships, higher nonlending revenues, and those that pledge collateral, especially outside assets and real estate, experience less credit rationing. Consistent with a tightening of financing constraints post shock, borrower composition shifts toward larger and less risky firms, and loans exhibit higher collateralization rates. Our analysis highlights the value of relationships and suggests that relationship banking is a channel through which borrowers can mitigate lending-channel effects.

Making Room for the Needy: The Credit-Reallocation Effects of the ECB’s Corporate QE*

2020 ◽  
Author(s):  
Óscar Arce ◽  
Sergio Mayordomo ◽  
Ricardo Gimeno
Keyword(s):  
Corporate Bonds ◽  
Bank Loans ◽  
Corporate Sector ◽  
The Real ◽  
Credit Supply ◽  
Supply Shock ◽  
Bond Issuers ◽  
The Needy ◽  
Real Investment

Abstract We analyze how the ECB’s purchases of corporate bonds under its Corporate Sector Purchase Programme (CSPP) affected the financing of Spanish firms. We first document that the announcement of the CSPP in March 2016 raised firms’ propensity to issue bonds. The flipside was a drop in the demand for bank loans by bond issuers. Around 75% of the drop in loans previously made to debt issuers was redirected to other, smaller nonbond issuing firms. This reallocation process was led by banks with weaker liquidity positions experiencing credit outflows, which extended credit to the same firms they were rationing prior to the CSPP. This positive credit supply shock raised the real investment of nonissuing firms. The concomitant ECB’s Targeted Longer-Term Refinancing Operations (TLTRO-II) is estimated to have contributed to amplifying the credit-reallocation effect triggered by the CSPP.

scholarly journals DISINTERMEDIASI FUNGSI PERBANKAN DI INDONESIA PASCA KRISIS 1997 : Faktor Permintaan Atau Penawaran Kredit, Sebuah Pendekatan Dengan Model Disequilibrium

2007 ◽  
Vol 8 (1) ◽  
pp. 51-78
Author(s):  
Harmanta Harmanta ◽  
Dr. Mahyus Ekananda
Keyword(s):  
Maximum Likelihood ◽  
Interest Rate ◽  
Likelihood Estimation ◽  
Credit Market ◽  
New Keynesian ◽  
Bank Credit ◽  
Credit Crunch ◽  
Switching Regression ◽  
Credit Supply ◽  
Credit Demand

The goal of this paper is to analyze the determinants of bank credit declining, whether is dominated by the supply or the credit demand, post the financial crisis in Indonesia. This paper is a sort of New Keynesian approach, which pre assume the imperfectness of the credit market and hence create disequilibrium.Using the switching regression model and Maximum Likelihood Estimation to determine the probability of supply or demand determination, the result shows the existence of excess demand of credit during the crisis period, 1997/ 1998, confirming the credit crunch situation. After the crisis, the condition is reversed, where the credit supply is higher than the credit demand. The two findings implicitely shows the inflexibility of interest rate to equalize the credit market.JEL: D43, D82, E44, E51Keywords : Disintermediasi, kredit, disequilibrium, maximum likelihood, persamaan simultan, switching regression

scholarly journals How FinTech Enters China’s Credit Market

2019 ◽  
Vol 109 ◽  
pp. 60-64 ◽  
Author(s):  
Harald Hau ◽  
Yi Huang ◽  
Hongzhe Shan ◽  
Zixia Sheng
Keyword(s):  
Credit Market ◽  
Theoretical Models ◽  
Extensive Margin ◽  
Credit Supply ◽  
Comprehensive Data ◽  
Credit Scores

How does FinTech credit mitigate local credit supply frictions in China's segmented credit market? In our simple theoretical models, we show that FinTech credit (i) expands the extensive margin of credit to borrowers of lower credit scores and (ii) provides relatively more credit to borrowers with lower credit scores. We confirm both predictions based on comprehensive data from one of China's largest FinTech credit providers.

scholarly journals Credit-Market Sentiment and the Business Cycle*

2017 ◽  
Vol 132 (3) ◽  
pp. 1373-1426 ◽  
Author(s):  
David López-Salido ◽  
Jeremy C. Stein ◽  
Egon Zakrajšek
Keyword(s):  
Economic Activity ◽  
Financial Frictions ◽  
Investor Sentiment ◽  
Credit Market ◽  
Market Conditions ◽  
Market Sentiment ◽  
External Finance ◽  
Credit Supply ◽  
The Business Cycle

Abstract Using U.S. data from 1929 to 2015, we show that elevated credit-market sentiment in year t − 2 is associated with a decline in economic activity in years t and t + 1. Underlying this result is the existence of predictable mean reversion in credit-market conditions. When credit risk is aggressively priced, spreads subsequently widen. The timing of this widening is, in turn, closely tied to the onset of a contraction in economic activity. Exploring the mechanism, we find that buoyant credit-market sentiment in year t − 2 also forecasts a change in the composition of external finance: net debt issuance falls in year t, while net equity issuance increases, consistent with the reversal in credit-market conditions leading to an inward shift in credit supply. Unlike much of the current literature on the role of financial frictions in macroeconomics, this article suggests that investor sentiment in credit markets can be an important driver of economic fluctuations.

scholarly journals Credit Supply and the Price of Housing

2015 ◽  
Vol 105 (3) ◽  
pp. 958-992 ◽  
Author(s):  
Giovanni Favara ◽  
Jean Imbs
Keyword(s):  
Instrumental Variable ◽  
Housing Stock ◽  
House Prices ◽  
Housing Demand ◽  
Housing Supply ◽  
Credit Expansion ◽  
Credit Supply ◽  
Mortgage Credit ◽  
Supply Shock ◽  
Rule Out

An exogenous expansion in mortgage credit has significant effects on house prices. This finding is established using US branching deregulations between 1994 and 2005 as instruments for credit. Credit increases for deregulated banks, but not in placebo samples. Such differential responses rule out demand-based explanations, and identify an exogenous credit supply shock. Because of geographic diver-sification, treated banks expand credit: housing demand increases, house prices rise, but to a lesser extent in areas with elastic housing supply, where the housing stock increases instead. In an instrumental variable sense, house prices are well explained by the credit expansion induced by deregulation. (JEL G21, G28, R21, R31)

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