Who Pays for Financial Crises? Price and Quantity Rationing of Different Borrowers by Domestic and Foreign Banks

48 Pages Posted: 1 Aug 2018

See all articles by Allen N. Berger

Allen N. Berger

University of South Carolina - Darla Moore School of Business; Wharton Financial Institutions Center; European Banking Center

Rima Turk-Ariss

International Monetary Fund; Economic Research Forum

Tanakorn Makaew

Securities and Exchange Commission (SEC)

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Date Written: July 2018

Abstract

Financial crises result in price and quantity rationing of otherwise creditworthy business borrowers, but little is known about the relative severity of these two types of rationing, which borrowers are rationed most, and the roles of foreign and domestic banks. Using a dataset from 50 countries containing over 18,000 business loans with information on the lender, the borrower, and contract terms, we find that publicly-listed borrowers are rationed more by prices or interest rates, whereas privately-held borrowers are rationed more by the number of loans. Also, the global financial crisis appears to have changed how banks price borrower risk. Further, there are important differences between foreign and domestic banks and between U.S. and non-U.S. loans.

Keywords: Central banks and their policies, Western Hemisphere, Chile, Monetary policy, Credit Rationing, Foreign Banks, Financial Crises, Relationship Lending, central bank communication, central bank predictability, Financial Markets and the Macroeconomy, General, inflation forecast dispersion, Monetary Policy (Targets, Instruments, and Effects), monetary policy shocks, proxy VAR

JEL Classification: G01, G21, O16

Suggested Citation

Berger, Allen N. and Turk-Ariss, Rima and Makaew, Tanakorn, Who Pays for Financial Crises? Price and Quantity Rationing of Different Borrowers by Domestic and Foreign Banks (July 2018). IMF Working Paper No. 18/158. Available at SSRN: https://ssrn.com/abstract=3221267

Allen N. Berger (Contact Author)

University of South Carolina - Darla Moore School of Business ( email )

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Wharton Financial Institutions Center

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European Banking Center

P.O. Box 90153
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Rima Turk-Ariss

International Monetary Fund ( email )

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United States

Economic Research Forum ( email )

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(P.O. Box: 12311)
Dokki, Cairo
Egypt

Tanakorn Makaew

Securities and Exchange Commission (SEC) ( email )

450 Fifth Street, NW
Washington, DC 20549-1105
United States

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