Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/278643 
Year of Publication: 
2023
Series/Report no.: 
ECB Working Paper No. 2823
Publisher: 
European Central Bank (ECB), Frankfurt a. M.
Abstract: 
Our paper uses credit registry data for the euro area to examine how the banking system transmits asset price shocks to credit via revaluation of collateral and subsequent lending decisions. Specifically we examine banks' treatment of real estate collateral during the Covid-19 crisis. First we find evidence of significant frictions in the transmission of asset price dynamics to collateral values. Despite this we find that lending relationships reliant on real estate collateral received one third less credit following the outbreak of the pandemic and that firms experiencing downward revaluations of their collateral were significantly less likely to be given new loans. Our findings confirm that the collateral channel does create an economically significant link between real estate values and credit but suggest that the banking system's role in transmission may be more complex than traditional economic theory would imply.
Subjects: 
Real estate
collateral channel
financial accelerator
banking
microdata
JEL: 
G21
R3
C55
Persistent Identifier of the first edition: 
ISBN: 
978-92-899-6086-1
Document Type: 
Working Paper

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