Banks' financial distress, lending supply and consumption expenditure

Evren Damar, Reint Gropp and Adi Mordel

No 39, SAFE Working Paper Series from Leibniz Institute for Financial Research SAFE

Abstract: We employ a unique identification strategy linking survey data on household consumption expenditure to bank-level data to estimate the effects of bank financial distress on consumer credit and consump- tion expenditures. We show that households whose banks were more exposed to funding shocks report lower levels of non-mortgage liabilities. This, however, does not result in lower levels of consumption. Households compensate by drawing down liquid assets to smooth consumption 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 and employment decisions.

Keywords: Credit supply; banking; financial crisis; consumption expenditure; liquid assets; consumption smoothing (search for similar items in EconPapers)
JEL-codes: E21 E44 G01 G21 (search for similar items in EconPapers)
Date: 2014, Revised 2014
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)

Downloads: (external link)
https://www.econstor.eu/bitstream/10419/203273/1/safe-wp-039_2.pdf (application/pdf)

Related works:
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) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:zbw:safewp:39

DOI: 10.2139/ssrn.2375103

Access Statistics for this paper

More papers in SAFE Working Paper Series from Leibniz Institute for Financial Research SAFE Contact information at EDIRC.
Bibliographic data for series maintained by ZBW - Leibniz Information Centre for Economics ().