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The Collateral Channel and Bank Credit

Arun Gupta, Horacio Sapriza and Vladimir Yankov
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Arun Gupta: https://www.federalreserve.gov/econres/arun-gupta.htm

No 2022-024, Finance and Economics Discussion Series from Board of Governors of the Federal Reserve System (U.S.)

Abstract: Our paper studies the role of the collateral channel for bank credit using confidential bank-firm-loan data. We estimate that for a 1 percent increase in collateral values, firms pledging real estate collateral experience a 12 basis point higher growth in bank lending with higher sensitivities for more credit constrained firms. Higher real estate values boost firm capital expenditures and lead to lower unemployment and higher employment growth and business creation. Our estimates imply that as much as 37 percent of employment growth over the period from 2013 to 2019 can be attributed to the relaxation of borrowing constraints.

Keywords: Collateral channel; Firm borrowing constraints; Bank credit allocation; Corporate investment; Macro-finance; Transmission mechanism (search for similar items in EconPapers)
JEL-codes: E44 G21 (search for similar items in EconPapers)
Pages: 59 p.
Date: 2022-05-10
New Economics Papers: this item is included in nep-ban, nep-bec, nep-cfn, nep-fdg, nep-isf, nep-mac and nep-ure
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Citations: View citations in EconPapers (3)

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https://www.federalreserve.gov/econres/feds/files/2022024pap.pdf (application/pdf)

Related works:
Journal Article: The Collateral Channel and Bank Credit (2023) Downloads
Working Paper: The Collateral Channel and Bank Credit (2022) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedgfe:2022-24

DOI: 10.17016/FEDS.2022.024

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