The Real Effects of Liquidity During the Financial Crisis: Evidence from Automobiles / Efraim Benmelech, Ralf R. Meisenzahl, Rodney Ramcharan.

Format:

Book

Author/Creator:

Benmelech, Efraim.

Contributor:

National Bureau of Economic Research.

Meisenzahl, Ralf R.

Ramcharan, Rodney.

Series:

Working Paper Series (National Bureau of Economic Research) no. w22148.

NBER working paper series no. w22148

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Other Title:

Real Effects of Liquidity During the Financial Crisis

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2016.

Summary:

Illiquidity in short-term credit markets during the financial crisis might have severely curtailed the supply of non-bank consumer credit. Using a new data set linking every car sold in the United States to the credit supplier involved in each transaction, we find that the collapse of the asset-backed commercial paper market reduced the financing capacity of such non-bank lenders as captive leasing companies in the automobile industry. As a result, car sales in counties that traditionally depended on non-bank lenders declined sharply. Although other lenders increased their supply of credit, the net aggregate effect of illiquidity on car sales is large and negative. We conclude that the decline in auto sales during the financial crisis was caused in part by a credit supply shock driven by the illiquidity of the most important providers of consumer finance in the auto loan market. These results also imply that interventions aimed at arresting illiquidity in short-term credit markets might have helped to contain the real effects of the crisis.

Notes:

Print version record

April 2016.