Cyclicality of credit supply: Firm level evidence

Bo Becker and Victoria Ivashina

Journal of Monetary Economics, 2014, vol. 62, issue C, 76-93

Abstract: We quantify fluctuations in bank-loan supply in the time-series by studying firms' substitution between loans and bonds using firm-level data. Any firm that raises new debt must have a positive demand for external funds. Conditional on the issuance of new debt, we interpret firms' switching from loans to bonds as a contraction in bank-credit supply. We find strong evidence of this substitution at times that are characterized by tight lending standards, depressed aggregate lending, poor bank performance, and tight monetary policy. We show that this substitution behavior has strong predictive power for bank borrowing and investments by small firms.

Keywords: Banks; Financial markets and the macroeconomy; Business cycles; Credit cycles (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (338)

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Working Paper: Cyclicality of Credit Supply: Firm Level Evidence (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:moneco:v:62:y:2014:i:c:p:76-93

DOI: 10.1016/j.jmoneco.2013.10.002

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