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Sorting Out the Real Effects of Credit Supply / Briana Chang, Matthieu Gomez, Harrison Hong.
- Format:
- Book
- Author/Creator:
- Chang, Briana.
- Series:
- Working Paper Series (National Bureau of Economic Research) no. w28842.
- NBER working paper series no. w28842
- Language:
- English
- Physical Description:
- 1 online resource: illustrations (black and white);
- Place of Publication:
- Cambridge, Mass. National Bureau of Economic Research 2021.
- Summary:
- We document that banks which cut lending more during the Great Recession were lending to riskier firms. To explain this evidence, we build a competitive matching model of bank-firm relationships in which risky firms borrow from banks with low holding costs. Based on default probabilities and equilibrium loan rates, we use our sorting model to recover the latent bank holding cost distribution. The measure of banks with low holding costs dropped during the Great Recession. This credit supply shift conservatively accounted for around 50% of the decline in corporate loans over this period. Our attribution cannot be captured by panel regression estimates from the bank lending channel literature.
- Notes:
- Print version record
- May 2021.
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