Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/60894
Authors: 
Adrian, Tobias
Colla, Paolo
Shin, Hyun Song
Year of Publication: 
2011
Series/Report no.: 
Staff Report, Federal Reserve Bank of New York 528
Abstract: 
The financial crisis of 2007-09 has sparked keen interest in models of financial frictions and their impact on macro activity. Most models share the feature that borrowers suffer a contraction in the quantity of credit. However, the evidence suggests that although bank lending contracted during the crisis, bond financing actually increased to make up much of the gap. This paper reviews both aggregate and micro-level data and highlights the shift in the composition of credit between loans and bonds. Motivated by the evidence, we formulate a model of direct and intermediated credit that captures the key stylized facts. In our model, the impact on real activity comes from the spike in risk premiums rather than the contraction in the total quantity of credit.
Subjects: 
financial intermediation
credit supply
JEL: 
G10
G20
G21
E20
Document Type: 
Working Paper

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