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Cross-subsidization of Bad Credit in a Lending Crisis / Nikolaos Artavanis, Brian Jonghwan Lee, Stavros Panageas, Margarita Tsoutsoura.
- Format:
- Book
- Author/Creator:
- Artavanis, Nikolaos.
- Series:
- Working Paper Series (National Bureau of Economic Research) no. w29850.
- NBER working paper series no. w29850
- Language:
- English
- Physical Description:
- 1 online resource: illustrations (black and white);
- Place of Publication:
- Cambridge, Mass. National Bureau of Economic Research 2022.
- Summary:
- We study the corporate-loan pricing decisions of a major Greek bank during the Greek financial crisis. A unique aspect of our dataset is that we observe both the interest rate and the "breakeven rate" of each loan, as computed by the bank's own loan-pricing department (in effect, the loan's marginal cost). We document that low-breakeven-rate (safer) borrowers are charged significant markups, whereas high-breakeven-rate (riskier) borrowers are charged small and sometimes even negative markups. We rationalize this de-facto cross-subsidization of riskier borrowers by safer borrowers through the lens of a dynamic model featuring depressed collateral values, impaired capital-market access, and limit pricing.
- Notes:
- Print version record
- March 2022.
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