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
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Englisch
- ISBN
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978-952-462-503-6
- Erschienen in
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Series: Bank of Finland Research Discussion Papers ; No. 10/2009
- Klassifikation
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Wirtschaft
Household Saving; Personal Finance
Business Fluctuations; Cycles
Money Supply; Credit; Money Multipliers
Banks; Depository Institutions; Micro Finance Institutions; Mortgages
- Thema
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credit policy
credit constraints
household borrowing
frontier analysis
- Ereignis
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Geistige Schöpfung
- (wer)
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Herrala, Risto
- Ereignis
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Veröffentlichung
- (wer)
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Bank of Finland
- (wo)
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Helsinki
- (wann)
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2009
- Handle
- Letzte Aktualisierung
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20.09.2024, 08:21 MESZ
Datenpartner
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Objekttyp
- Arbeitspapier
Beteiligte
- Herrala, Risto
- Bank of Finland
Entstanden
- 2009