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Jiménez, Gabriel
Ongena, Steven
Peydró, José-Luis
Saurina, Jesús
Year of Publication: 
[Journal:] Econometrica [Volume:] 82 [Issue:] 2 [Pages:] 463-505 [ISSN:] 1468-0262
We identify the effects of monetary policy on credit risk-taking with an exhaustive credit register of loan applications and contracts. We separate the changes in the composition of the supply of credit from the concurrent changes in the volume of supply and quality and volume of demand. We employ a two-stage model that analyzes the granting of loan applications in the first stage and loan outcomes for the applications granted in the second stage, and that controls for both observed and unobserved, time-varying, firm and bank heterogeneity through time*firm and time*bank fixed effects. We find that a lower overnight interest rate induces lowly capitalized banks to grant more loan applications to ex-ante risky firms and to commit larger loan volumes with fewer collateral requirements to these firms, yet with a higher expost likelihood of default. A lower long-term interest rate and other relevant macroeconomic variables have no such effects.
monetary policy
financial stability
credit risk
credit supply composition
bank capital
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Document Version: 
Accepted Manuscript (Postprint)

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