Dynamic credit constraints: theory and evidence from credit lines

Anna Rogantini Picco, Niklas Amberg, Tor Jacobson and Vincenzo Quadrini

No 3216, Working Paper Series from European Central Bank

Abstract: We use a comprehensive Swedish credit register to document that firms across the size distribution have access to substantial borrowing capacity via credit lines. However, most firms choose not to use all available credit, even though interest rates are low compared to their return on equity. The low utilization of credit is consistent with a theoretical model in which utilization rates decrease with both real and financial uncertainty. We estimate the model structurally at the firm level and find that financial uncertainty driven by liquidity shocks is much more important than real uncertainty driven by cash flow shocks for explaining the low utilization of credit. JEL Classification: D22, E44, G21, G32

Keywords: banks; credit constraints; credit lines; precautionary behavior; uncertainty (search for similar items in EconPapers)
Date: 2026-04
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Related works:
Working Paper: Dynamic Credit Constraints: Theory and Evidence from Credit Lines (2023)
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Persistent link: https://EconPapers.repec.org/RePEc:ecb:ecbwps:20263216

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