Search Frictions, Credit Market Liquidity, and Net Interest Margin Cyclicality

Kevin Beaubrun-Diant and Fabien Tripier

Working Papers from CEPII research center

Abstract: The present paper contributes to the body of knowledge on search frictions in credit markets by demonstrating their ability to explain why the net interest margins of banks behave countercyclically. During periods of expansion, a fall in the net interest margin proceeds from two mechanisms: (i) lenders accept that they must finance entrepreneurs that have lower productivity and (ii) the liquidity of the credit market rises, which simplifies access to loans for entrepreneurs and thereby reinforces their threat point when bargaining the interest rate of the loan.

Keywords: Search Friction; Matching Model; Nash Bargaining; Bank Interest Margin (search for similar items in EconPapers)
JEL-codes: C78 E32 E44 G21 (search for similar items in EconPapers)
Date: 2013-12
New Economics Papers: this item is included in nep-ban, nep-dge and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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Related works:
Journal Article: Search Frictions, Credit Market Liquidity and Net Interest Margin Cyclicality (2015)
Working Paper: Search Frictions, Credit Market Liquidity, and Net Interest Margin Cyclicality (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:cii:cepidt:2013-41

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