Lending standards over the credit cycle

Rodano, Giacomo ; Serrano-Velarde, Nicolas ; Tarantino, Emanuele

URL:	https://www.bde.es/f/webpi/SES/seminars/2015/files...
Weitere URL:	ftp://ftp.igier.unibocconi.it/wp/2015/563.pdf
Dokumenttyp:	Arbeitspapier
Erscheinungsjahr:	2015
Titel einer Zeitschrift oder einer Reihe:	Working paper / IGIER - Università Bocconi
Band/Volume:	563
Ort der Veröffentlichung:	Milano
Verwandte URLs:	https://ssrn.com/abstract=2699553
Sprache der Veröffentlichung:	Englisch
Einrichtung:	Fakultät für Rechtswissenschaft und Volkswirtschaftslehre > VWL, Mikroökonomik (Juniorprofessur) (Tarantino 2014-2019)
Fachgebiet:	330 Wirtschaft
Fachklassifikation:	JEL: E32 , E44 , G21,
Freie Schlagwörter (Englisch):	Credit Cycles ; Financial Contracts ; Credit Rationing ; Real Activity
Abstract:	We empirically identify the lending standards applied by banks to small and medium firms over the cycle. We exploit an institutional feature of the Italian credit market that generates a sharp discontinuity in the allocation of comparable firms into credit risk categories. Using loan-level data, we show that during the expansionary phase of the cycle, banks relax lending standards by narrowing the interest rate spreads between substandard and performing firms. During the contractionary phase of the cycle, the abrupt tightening of lending standards leads to the exclusion of substandard firms from credit. These firms then report significantly lower production, investment, and employment. Finally, we find that the drying up of the interbank market is an important factor determining the change in bank lending standards.