The real effects of the bank lending channel

Jiménez, Gabriel; Mian, Atif; Peydró, José-Luis; Saurina, Jesús

doi:http://dx.doi.org/10.1016/j.jmoneco.2019.06.002

The real effects of the bank lending channel

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Jimenez G, Mian A, Peydró JL, Saurina J. The real effects of the bank lending channel. J Monet Econ. 2019 Jun 15;115:162-79. DOI: 10.1016/j.jmoneco.2019.06.002

Abstract

This paper studies credit booms exploiting the Spanish matched credit register over 2001–2009. We extend Khwaja and Mian’s (2008) loan-level estimator by incorporating firm-level general equilibrium adjustments. Higher ex-ante bank real-estate exposure increases credit supply to non-real-estate firms, but effects are neutralized by firm-level adjustments for firms with existing banking relationships. However, higher bank real-estate exposure increases risk-taking, by relaxing standards of existing borrowers (cheaper, longer-term and less collateralized credit), and by expanding credit on the extensive margin to first-time borrowers that default substantially more. Results suggest that the mechanism at work is greater liquidity via securitization of real-estate assets.