Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/154294
Authors: 
Altavilla, Carlo
Darracq Pariès, Matthieu
Nicoletti, Giulio
Year of Publication: 
2015
Series/Report no.: 
ECB Working Paper 1861
Abstract: 
We use bank-level information on lending practices from the euro area Bank Lending Survey to construct a new indicator of loans’ supply tightening controlling for both macroeconomic and bank-specific factors. Embedding this information as external instrument in a Bayesian vector autoregressive model (BVAR), we find that tighter bank loan supply to non-financial corporations leads to a protracted contraction in credit volumes and higher bank lending spreads. This fosters firms’ incentives to substitute bank loans with market finance, producing a significant increase in debt securities issuance and higher bond spreads. We also show that loans’ tightening shocks explain a large fraction of the contraction in real activity and the widening of credit spreads especially over the recession which followed the euro area sovereign debt crisis.
Subjects: 
Bank Lending Survey
Credit Supply
External Instruments
Lending standards
JEL: 
E51
E44
C32
Persistent Identifier of the first edition: 
ISBN: 
978-92-899-1674-5
Document Type: 
Working Paper

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