Credit Supply versus Demand

Bank and Firm Balance-Sheet Channels in Good and Crisis Times

G. Jimenez Porras, S. Ongena, J.L. Peydro, J. Saurina

Research output: Working paperDiscussion paperOther research output

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Abstract

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.
Original languageEnglish
Place of PublicationTilburg
PublisherEBC
Number of pages34
Volume2012-003
Publication statusPublished - 2012

Publication series

NameEBC Discussion Paper
Volume2012-003

Fingerprint

Loans
Balance sheet
Credit supply
Credit growth
Firm-level data
Spain
Banking crisis
Economic growth
Factor demand

Keywords

  • bank lending channel
  • credit supply
  • business cycle
  • credit crunch
  • capital
  • liquidity

Cite this

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). Tilburg: EBC.
Jimenez Porras, G. ; Ongena, S. ; Peydro, J.L. ; Saurina, J. / Credit Supply versus Demand : Bank and Firm Balance-Sheet Channels in Good and Crisis Times. Tilburg : EBC, 2012. (EBC Discussion Paper).
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abstract = "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.",
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Jimenez Porras, G, Ongena, S, Peydro, JL & 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, Tilburg.

Credit Supply versus Demand : Bank and Firm Balance-Sheet Channels in Good and Crisis Times. / Jimenez Porras, G.; Ongena, S.; Peydro, J.L.; Saurina, J.

Tilburg : EBC, 2012. (EBC Discussion Paper; Vol. 2012-003).

Research output: Working paperDiscussion paperOther research output

TY - UNPB

T1 - Credit Supply versus Demand

T2 - Bank and Firm Balance-Sheet Channels in Good and Crisis Times

AU - Jimenez Porras, G.

AU - Ongena, S.

AU - Peydro, J.L.

AU - Saurina, J.

N1 - This is also CentER Discussion Paper 2012-005 Pagination: 34

PY - 2012

Y1 - 2012

N2 - 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.

AB - 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.

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KW - credit supply

KW - business cycle

KW - credit crunch

KW - capital

KW - liquidity

M3 - Discussion paper

VL - 2012-003

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BT - Credit Supply versus Demand

PB - EBC

CY - Tilburg

ER -

Jimenez Porras G, Ongena S, Peydro JL, Saurina J. Credit Supply versus Demand: Bank and Firm Balance-Sheet Channels in Good and Crisis Times. Tilburg: EBC. 2012. (EBC Discussion Paper).