Local Versus Aggregate Lending Channels: The Effects of Securitization on Corporate Credit Supply
Bank of Spain
Mian Muhammad Atif
affiliation not provided to SSRN
Universitat Pompeu Fabra - Faculty of Economic and Business Sciences; Barcelona Graduate School of Economics
Jesus Saurina Salas
Bank of Spain
October 6, 2011
Banco de Espana Working Paper No. 1124
While banks may change their credit supply due to bank balance-sheet shocks (the local lending channel), firms can react by adjusting their sources of financing in equilibrium (the aggregate lending channel). We provide a methodology to identify the aggregate (firm-level) effects of the lending channel and estimate the impact of banks’ ability to securitize real estate assets on credit supply for non real-estate firms in Spain over 2000-2010. We show that firm-level equilibrium dynamics nullify the strong local (bank-level) lending channel of securitization on credit quantity for firms with multiple banking relationships. Credit terms however become softer, but there are no real effects. Securitization implies a credit expansion on the extensive margin towards first-time bank clients, which are more likely to default. Finally, the 2008 securitization collapse reverses the local lending channel.
Number of Pages in PDF File: 57
Keywords: bank lending channel, credit supply, credit demand, macroprudential, real economy effects of finance, securitization
JEL Classification: G21, G28, G01, G30, E44, E50working papers series
Date posted: October 6, 2011
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