Credit Market Spillovers: Evidence from a Syndicated Loan Market Network

65 Pages Posted: 17 Nov 2017

See all articles by Abhimanyu Gupta

Abhimanyu Gupta

University of Essex - Department of Economics

Sotirios Kokas

University of Glasgow - Adam Smith Business School

Alexander Michaelides

Imperial College Business School; Centre for Economic Policy Research (CEPR)

Multiple version iconThere are 2 versions of this paper

Date Written: November 2017

Abstract

A large theoretical literature emphasizes the importance of financial networks, but empirical studies remain scarce. Due to overlapping bank portfolios, the syndicated loan market provides a natural setting to study financial networks. We exploit the tiered structure of syndicated loans to construct such a network and characterize quantitatively its evolution over time. A spatial autoregressive model provides an ideal methodological framework to estimate spillovers from this financial network to lending rates and quantities. We find that these spillovers are economically large, time-varying and can switch sign after major economic shocks. Moreover, we find that network complexity and uncertainty rise after a large negative shock. Counterfactual experiments confirm the quantitative importance of spillovers and network structure on lending rates and quantities and can be used to disentangle the effects arising from spillovers versus changes in network structure.

Keywords: complexity., cost of lending, Financial Networks, spatial autoregression, Spillovers, syndicated loan market

JEL Classification: G01, G21, L14

Suggested Citation

Gupta, Abhimanyu and Kokas, Sotirios and Michaelides, Alexander, Credit Market Spillovers: Evidence from a Syndicated Loan Market Network (November 2017). CEPR Discussion Paper No. DP12424. Available at SSRN: https://ssrn.com/abstract=3071056

Abhimanyu Gupta (Contact Author)

University of Essex - Department of Economics ( email )

Wivenhoe Park
Colchester CO4 3SQ
United Kingdom

Sotirios Kokas

University of Glasgow - Adam Smith Business School ( email )

Glasgow, Scotland
United Kingdom
0044141 330 4297 (Phone)

HOME PAGE: http://https://sites.google.com/site/sotirioskokas/home

Alexander Michaelides

Imperial College Business School ( email )

South Kensington Campus
Exhibition Road
London SW7 2AZ, SW7 2AZ
United Kingdom

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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