Credit Supply: Identifying Balance-Sheet Channels with Loan Applications and Granted Loans
Bank of Spain
Tilburg University - CentER, European Banking Center (EBC); Centre for Economic Policy Research (CEPR)
Universitat Pompeu Fabra - Faculty of Economic and Business Sciences; Barcelona Graduate School of Economics
Jesus Saurina Salas
Bank of Spain
September 30, 2010
Banco de Espana Working Paper No. 1030
To identify credit availability we analyze the extensive and intensive margins of lending with loan applications and all loans granted in Spain. We find that during the period analyzed both worse economic and tighter monetary conditions reduce loan granting, especially to firms or from banks with lower capital or liquidity ratios. Moreover, responding to applications for the same loan, weak banks are less likely to grant the loan. Our results suggest that firms cannot offset the resultant credit restriction by turning to other banks. Importantly the bank-lending channel is notably stronger when we account for unobserved time-varying firm heterogeneity in loan demand and quality.
Number of Pages in PDF File: 44
Keywords: Non-Financial and Financial Borrower Balance-Sheet Channels, Financial Accelerator, Firm Borrowing Capacity, Credit Supply, Business Cycle, Monetary Policy, Credit Channel, Net Worth, Capital, Liquidity, 2007-09 Crisis
JEL Classification: E32, E44, E5, G21, G28working papers series
Date posted: October 1, 2010
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