Credit demand vs. supply channels: Experimental- and administrative-based evidence

Valentina Michelangeli, Enrico Sette and Jose-Luis Peydro

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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.

Keywords: credit demand; credit supply; bank lending channel; household balance sheet channel; mortgages; SMEs; risk-taking (search for similar items in EconPapers)
JEL-codes: C93 E51 G21 G51 (search for similar items in EconPapers)
Date: 2020
New Economics Papers: this item is included in nep-eur
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Working Paper: Credit demand vs. supply channels: Experimental- and administrative-based evidence (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:esprep:222282

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