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

Kevin Beaubrun-Diant and Fabien Tripier

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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)
Date: 2015
Note: View the original document on HAL open archive server: https://hal.science/hal-01515427v1
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Citations: View citations in EconPapers (2)

Published in Economica, 2015, 82 (325), pp.79-102. ⟨10.1111/ecca.12101⟩

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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 (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-01515427

DOI: 10.1111/ecca.12101

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