Credit Market Fluidity

69 Pages Posted: 7 Jul 2022 Last revised: 24 Mar 2023

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: June 25, 2022

Abstract

We coin the term credit market fluidity to describe the intensity of credit reallocation, and study its
properties and determinants within the commercial loan market in France over the period 1998 through 2018. Leveraging credit register data, we show that the reallocation of credit relationships exhibits (i) large magnitudes and variations throughout the cycle, (ii) a significant degree of heterogeneity across banks and firms, and (iii) is procyclical. A decomposition into across- and within-bank reallocation components highlights that bank- and firm-level heterogeneity only account for 10% and 40% of credit market fluidity, respectively, suggesting a predominant role for idiosyncratic factors. At the bank level, credit fluidity is associated with lower credit risk and higher borrower productivity, but has a muted effect on loan profitability. We also uncover a positive relationship between fluidity and growth and associate the secular decline of the former throughout the past decade with a credit volume gap amounting to up to EUR 100 billion.

Keywords: Credit Flows, Credit Reallocation, Financial Institutions, Relationship Lending

JEL Classification: E40, E50, G20

Suggested Citation

Boualam, Yasser and Mazet-Sonilhac, Clément, Credit Market Fluidity (June 25, 2022). Kenan Institute of Private Enterprise Research Paper No. 4147826, Available at SSRN: https://ssrn.com/abstract=4147826 or http://dx.doi.org/10.2139/ssrn.4147826

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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