Arbeitspapier

Credit crunch? An empirical test of cyclical credit policy

In this paper we test the hypothesis that credit policies are pro-cyclical. Our approach is based on a stochastic frontier analysis of borrower data, as in Chen and Wang (2008). We extend the applicability of the approach, and propose a novel test specification which is informative of many types of pro-cyclicality. The analysis of representative samples of household borrowers during a huge cycle and its aftermath yields evidence of time-varying credit policy. We find that the focus of credit policy changed from collateral to current income during the cycle. Instead of a credit crunch, ie, an overall tightening of credit during the economic and financial contraction, we find a tightening of credit limits with respect to a minority of borrowers and an easing for the majority. In the course of the post-crisis period, credit policy became more lenient. Both the level of credit limits and the 'tailoring' of limits to group-specific characteristics of households increased. A reduction in the idiosyncratic variance of limits suggest that banks have become more consistent in their credit policies.

Sprache
Englisch
ISBN
978-952-462-503-6

Erschienen in
Series: Bank of Finland Research Discussion Papers ; No. 10/2009

Klassifikation
Wirtschaft
Household Saving; Personal Finance
Business Fluctuations; Cycles
Money Supply; Credit; Money Multipliers
Banks; Depository Institutions; Micro Finance Institutions; Mortgages
Thema
credit policy
credit constraints
household borrowing
frontier analysis

Ereignis
Geistige Schöpfung
(wer)
Herrala, Risto
Ereignis
Veröffentlichung
(wer)
Bank of Finland
(wo)
Helsinki
(wann)
2009

Handle
Letzte Aktualisierung
20.09.2024, 08:21 MESZ

Datenpartner

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Objekttyp

  • Arbeitspapier

Beteiligte

  • Herrala, Risto
  • Bank of Finland

Entstanden

  • 2009

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