The Flow Approach to Credit Markets: Methodology, Measurements, and Macro Perspectives

91 Pages Posted: 27 Mar 2020 Last revised: 22 Feb 2022

See all articles by Yasser Boualam

Yasser Boualam

University of North Carolina (UNC) at Chapel Hill - Kenan-Flagler Business School

Clément Mazet-Sonilhac

Banque de France; Collège de France; SciencesPo - Sciences Po - Department of Economics

Date Written: March 3, 2020

Abstract

We provide empirical foundations for a flow approach to credit markets and derive novel extensive/intensive margin decompositions for aggregate credit dynamics. Using bank-firm level data for commercial lending in France, we establish that the creation and destruction of credit relationship flows are (i) one order of magnitude larger than net flows, and (ii) volatile and pervasive throughout the cycle. Banks actively adjust their loan portfolios along the extensive margin, which (iii) contributes up to 46% of the cyclical and 90% of the long-run credit variations. We also document the distinct features of the extensive and intensive margin channels of monetary policy.

Keywords: Credit Flows; Financial Institutions; Monetary Policy Transmission; Relationship Lending; Search and Matching

JEL Classification: E50, G20

Suggested Citation

Boualam, Yasser and Mazet-Sonilhac, Clément, The Flow Approach to Credit Markets: Methodology, Measurements, and Macro Perspectives (March 3, 2020). Available at SSRN: https://ssrn.com/abstract=3548327 or http://dx.doi.org/10.2139/ssrn.3548327

Yasser Boualam (Contact Author)

University of North Carolina (UNC) at Chapel Hill - Kenan-Flagler Business School ( email )

McColl Building
Chapel Hill, NC 27599-3490
United States

HOME PAGE: http://www.yasserboualam.com

Clément Mazet-Sonilhac

Banque de France ( email )

Paris
France

Collège de France ( email )

11 Place Marcelin Berthelot
Paris, 75231
France

SciencesPo - Sciences Po - Department of Economics ( email )

28, rue des Saints-Pères
Paris, Paris 75007
France

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