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Credit demand versus supply channels: Experimental- and administrative-based evidence

Valentina Michelangeli (), José-Luis Peydró () and Enrico Sette
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José-Luis Peydró: https://www.upf.edu/web/econ/faculty/-/asset_publisher/6aWmmXf28uXT/persona/id/3420538

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

Abstract: This paper identifies and quantifies -for the first time- the relative importance of borrower (credit demand) versus bank (supply) balance-sheet channels. We submit fictitious applications (varying households'characteristics) to the major Italian online-mortgage platform. In this way we ensure that all banks receive exactly the same mortgage applications, and that -for each application- there are other identical ones except for one borrower-level characteristic. We find that: (i) Borrower and bank channels are equally strong in causing (and explaining) loan acceptance (each channel changes acceptance by 50 p.p. for the interquartile range and explains 29% of R-square). (ii) Differently, for pricing, borrower factors are much stronger. (iii) Banks supplying less credit accept riskier borrowers. Finally -exploiting administrative credit register data- we document borrower-lender assortative matching: safer banks have more credit relations with safer firms. Moreover, the measure of credit supply estimated in the experiment (differently from a very similar measure estimated from the observational mortgage data) determines bank credit supply to firms and risk-taking in administrative data.

Date: 2020-07
New Economics Papers: this item is included in nep-ure
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