The Transmission of Bank Liquidity Shocks: Evidence from House Prices

H Özlem Dursun- de Neef

Review of Finance, 2019, vol. 23, issue 3, 629-658

Abstract: This article uses the 2007–09 financial crisis as a negative liquidity shock on banks in the USA and analyzes its transmission to the real economy. The ex ante heterogeneity in the amount of long-term debt that matured during the crisis is used to measure the variation in banks’ exposure to the liquidity shock. I find that banks transmitted the liquidity shock to the real economy by reducing their loan supply. The reduction was particularly strong for real estate loans. As a result, house prices declined in the MSAs where these banks have branches. Bank capital plays a significant role in the transmission: under-capitalized banks transmitted the liquidity shock, whereas well-capitalized banks’ lending did not show any decline.

Keywords: Financial crisis; Bank liquidity shocks; Bank capital; Credit supply shocks; House prices (search for similar items in EconPapers)
JEL-codes: G21 G28 R31 (search for similar items in EconPapers)
Date: 2019
References: Add references at CitEc
Citations: View citations in EconPapers (13)

Downloads: (external link)
http://hdl.handle.net/10.1093/rof/rfy001 (application/pdf)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:oup:revfin:v:23:y:2019:i:3:p:629-658.

Ordering information: This journal article can be ordered from
https://academic.oup.com/journals

Access Statistics for this article

Review of Finance is currently edited by Marcin Kacperczyk

More articles in Review of Finance from European Finance Association Oxford University Press, Great Clarendon Street, Oxford OX2 6DP, UK. Contact information at EDIRC.
Bibliographic data for series maintained by Oxford University Press ().