Abstract: Banking crises involve periods of persistently low credit and economic growth. Banks’ balance sheets are then weak but so are those of non-financial corporate borrowers. Hence, a crucial question is whether credit growth is low due to supply or to demand factors. However convincing identification has been elusive due to a lack of detailed loan application-, bank-, and firm-level data. Access to a dataset of loan applications in Spain that is matched with complete bank and firm balance-sheet data covering the period from 2002 to 2010 allows us to identify bank and firm balancesheet channels. We find robust evidence showing that bank balance-sheet strength determines the success of loan applications and the granting of loans in crisis times. The heterogeneity in firm balance-sheet strength determines loan granting in both good and crisis times, although the potency of this firm balance-sheet channel is the largest in the latter period. Our findings therefore hold important implications for both theory and policy.
|Place of Publication||Tilburg|
|Number of pages||34|
|Publication status||Published - 2012|
|Name||EBC Discussion Paper|
- bank lending channel
- credit supply
- business cycle
- credit crunch
Jimenez Porras, G., Ongena, S., Peydro, J. L., & Saurina, J. (2012). Credit Supply versus Demand: Bank and Firm Balance-Sheet Channels in Good and Crisis Times. (EBC Discussion Paper; Vol. 2012-003). EBC.