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Interbank liquidity crunch and the firm credit crunch: Evidence from the 2007-2009 crisis

Rajkamal Iyer, Samuel Da-Rocha-Lopes, Jose-Luis Peydro () and Antoinette Schoar ()
Authors registered in the RePEc Author Service: Samuel Da-Rocha Lopes

Economics Working Papers from Department of Economics and Business, Universitat Pompeu Fabra

Abstract: We study the credit supply effects of the unexpected freeze of the European interbank market, using exhaustive Portuguese loan-level data. We find that banks that rely more on interbank borrowing before the crisis decrease their credit supply more during the crisis. The credit supply reduction is stronger for firms that are smaller, with weaker banking relationships. Small firms cannot compensate the credit crunch with other sources of debt. Furthermore, the impact of illiquidity on the credit crunch is stronger for less solvent banks. Finally, there are no overall positive effects of central bank liquidity, but higher hoarding of liquidity.

Keywords: Credit crunch; banking crisis; interbank markets; access to credit; flight to quality; lender of last resort; liquidity hoarding. (search for similar items in EconPapers)
JEL-codes: G01 G21 G28 G32 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ban, nep-fmk and nep-mon
Date: 2013-04
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Related works:
Journal Article: Interbank Liquidity Crunch and the Firm Credit Crunch: Evidence from the 2007--2009 Crisis (2014) Downloads
Working Paper: Interbank Liquidity Crunch and the Firm Credit Crunch: Evidence from the 2007-2009 Crisis (2013) Downloads
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