Lending Cycles / Patrick K. Asea, S. Brock Blomberg.

Format:

Book

Author/Creator:

Asea, Patrick K.

Contributor:

National Bureau of Economic Research.

Blomberg, S. Brock.

Series:

Working Paper Series (National Bureau of Economic Research) no. w5951.

NBER working paper series no. w5951

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 1997.

Summary:

We investigate the lending behavior of banks by exploiting a rich panel dataset on the contract terms of approximately two million commercial and industrial loans granted by 580 banks between 1977-1993. Using a Markov switching panel model we demonstrate that banks change their lending standards from tightness to laxity systematically over the cycle. We then use an efficient minimum chi-square estimator to examine the relationship between the cyclical component of aggregate unemployment and bank lending standards when both variables are jointly endogenously determined in a system of simultaneous equations with mixed, continuous/discrete dependent variables. The patterns we uncover suggest that lax lending standards that tend to occur during expansions exert considerable influence on the dynamics of aggregate fluctuations.

Notes:

Print version record

March 1997.