Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/154026
Authors: 
Popov, Alexander
Year of Publication: 
2013
Series/Report no.: 
ECB Working Paper 1593
Abstract: 
This paper conducts the first empirical study of the bank balance sheet channel using data on discouraged and informally rejected firms in addition to information on the formal loan granting process. I take advantage of a unique survey data on the credit experience of firms in 8 economies that use the euro or are pegged to it over 2004-2007, and analyze the effect of monetary policy and the business cycle on bank lending and risk-taking. Identification rests on exploiting 1) the exogeneity of monetary policy to local business cycles, and 2) firm-level and bank-level data to separate the supply of credit from changes in the level and composition of credit demand. Consistent with previous studies, I find that lax monetary conditions increase bank credit in general and bank credit to ex-ante risky firms in particular, especially for banks with lower capital ratios. Importantly, I find that the results are considerably stronger when data on informal credit constraints are incorporated.
Subjects: 
bank capital
bank lending channel
business cycle
cross-border lending
monetary policy
JEL: 
E32
E51
E52
F34
G21
Document Type: 
Working Paper

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