Bank's financial distress, lending supply and consumption expenditure
Reint Gropp () and
No 39, SAFE Working Paper Series from Research Center SAFE - Sustainable Architecture for Finance in Europe, Goethe University Frankfurt
The paper employs a unique identification strategy that links survey data on household consumption expenditure to bank level data in order to estimate the effects of bank financial distress on consumer credit and consumption expenditures. Specifically, we show that households whose banks were more exposed to funding shocks report significantly lower levels of non-mortgage liabilities compared to a matched sample of households. The reduced access to credit, however, does not result in lower levels of consumption. Instead, we show that households compensate by drawing down liquid assets. Only households without the ability to draw on liquid assets reduce consumption. The results are consistent with consumption smoothing in the face of a temporary adverse lending supply shock. The results contrast with recent evidence on the real effects of finance on firms' investment, where even temporary adverse credit supply shocks are associated with significant real effects.
Keywords: credit supply; banking; financial crisis; consumption expenditure; liquid assets; consumption smoothing (search for similar items in EconPapers)
JEL-codes: E21 E44 G21 G01 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ban and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3) Track citations by RSS feed
Downloads: (external link)
Working Paper: Banks’ Financial Distress, Lending Supply and Consumption Expenditure (2014)
Working Paper: Banks' financial distress, lending supply and consumption expenditure (2014)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:zbw:safewp:39
Access Statistics for this paper
More papers in SAFE Working Paper Series from Research Center SAFE - Sustainable Architecture for Finance in Europe, Goethe University Frankfurt Contact information at EDIRC.
Bibliographic data for series maintained by ZBW - Leibniz Information Centre for Economics ().