Do Credit Supply and Unemployment Risk Matter for Household Saving? Evidence from Poland

This paper contributes to the literature on the effects of uncertainty on household saving – a long-standing and extensively explored topic yet leaving a number of issues inconclusive. It concentrates on the labor income uncertainty by addressing saving against unemployment risk in terms of changes in credit supply and households’ financial wealth. Time series analysis uses dataset of quarterly observations from 2003 Q4 to 2019 Q3 for Poland. It provides empirical evidence of the negative relationship of changes in households’ financial wealth and credit availability with the household propensity to save, in line with the buffer saving model. Furthermore, it contributes to the discussion on the choice of uncertainty measures referring to the labor market with a recommendation to employ the subjective (perceived) unemployment expectation index rather than the objective unemployment rate. These results are meaningful for policy implications. They emphasize the role of credit availability for household consumption/saving decisions. In case of expansionary monetary policy and making credit easier to acquire for households, all other things equal, a negative effect on the household saving rate may be expected. This poses a question about the risk of households’ overreliance on credit and therefore about their financial stability in emergency situations.

Credit Stimulus, Executive Ownership, and Firm Leverage

We show that executive ownership is a significant driver of the demand for credit following credit expansion policies. Our focus on credit demand is in contrast to most studies that have focused on credit supply factors such as bank capital. Our identification exploits the large and unexpected Chinese credit expansion in 2008. This setting offers a unique advantage as in 2008 the Chinese government had almost complete control over the banking sector and it directed the banks to increase credit supply. Thus, in this setting, demand, rather than supply, largely drives the observed changes in firms’ borrowing. We provide extensive robustness tests to validate our results. This paper was accepted by Kay Giesecke, finance.

Domestic Lending and the Pandemic: How Does Banks' Exposure to Covid-19 Abroad Affect Their Lending in the United States?

Shortly after the onset of the pandemic, U.S. banks cut their term lending to businesses–but little is known about how much, and why, banks' choice to ration credit contributed to this contraction. Afforded by a unique combination of several highly granular bank regulatory datasets, we identify the role of banks' exposure to Covid-related restrictions abroad – a balance sheet "shock" that affects only banks' credit supply, but not their US borrowers' demand for loans. We find that US banks with higher foreign Covid exposure cut their lending to US firms, and tightened terms on such loans, significantly more. Banks having become less risk tolerant, as well as foreign borrowers defaulting and drawing down on their cross-border credit lines, were potent mechanisms through which foreign Covid exposure reduced banks' domestic lending.

Influence of Monetary Policy on The Credit Supply To Small and Medium Scale Enterprises In Nigeria (1993 -2018)

The study examined the effect of monetary policy on credit supply to small and medium scale enterprises (SMEs) in Nigeria covering a temporal scope 1993 to 2018. It was modelled by using ratio of credit to SMEs to total credit (CSTC) as dependent variable while monetary policy rate (MPR), liquidity ratio (LQR), lending rate (LDR) and inflation (INF) were the explanatory variables. Secondary data were sourced from CBN Statistical Bulletin and the estimation was done using Auto regressive distributed lag (ARDL). The study found that monetary policy has negative and insignificant effects on credit supply to SMEs in the long run while in the short run, monetary policy has though insignificant positive but indirectly a significant positive effect through lending rate on credit available to SMEs. The implication is that, as MPR changes its effects are transmitted through lending rates of commercial banks to SMEs. Hence, the study concluded that monetary policy significantly and heterogeneously impacts on the credit supply to SMEs indirectly through lending rate in Nigeria. It was recommended among others that as the Central Bank of Nigeria continues to implement monetary policy in Nigeria, caution should be taken so that such decisions won’t be detrimental to businesses such as SMEs. In addition, MPR should be further reviewed downward in order to encourage SMEs from assessing more funds in Nigeria. Likewise, a pool of long-term funds should be created By Central Bank of Nigeria to bridge the financing gap of SMEs in Nigeria.