Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/320019 
Authors: 
Year of Publication: 
2023
Series/Report no.: 
CASMEF Working Paper Series No. WP 2023/05
Publisher: 
LUISS Guido Carli, Department of Economics and Finance, Arcelli Centre for Monetary and Financial Studies, Rome
Abstract: 
This paper presents a model in which firms have endogenously-persistent lending relationships with banks which compete both on interest rates and collateral requirements. The economy features an endogenously-evolving lending standard which is subject to an exogenous shock. A shock to bank lending standards in this model leads to a spike in spread, drop in bank credit and amplification of macroeconomic volatility. These e↵ects are higher at greater intensity and persistence of the lending relationships. This work shines a spotlight on how shocks to lending standards can have wider macroeconomic implications and shows how financial shocks can a↵ect real economy.
Subjects: 
Lending Standards
Deep Habits in Banking
Macroeconomic Fluctuations
JEL: 
E32
E44
Document Type: 
Working Paper

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