Credit demand vs. supply channels: Experimental- and administrative-based evidence

Arbeitspapier

This paper identifies and quantifies –for the first time– the relative importance of borrower (credit demand) versus bank (supply) balance-sheet channels. We submit fictitious applications (varying households’ characteristics) to the major Italian online-mortgage platform. In this way we ensure that all banks receive exactly the same mortgage applications, and that –for each application– there are other identical ones except for one borrower-level characteristic. We find that: (i) Borrower and bank channels are equally strong in causing (and explaining) loan acceptance (each channel changes acceptance by 50 p.p. for the interquartile range and explains 29% of R-square). (ii) Differently, for pricing, borrower factors are much stronger. (iii) Banks supplying less credit accept riskier borrowers. Finally –exploiting administrative credit register data– we document borrower-lender assortative matching: safer banks have more credit relations with safer firms. Moreover, the measure of credit supply estimated in the experiment (differently from a very similar measure estimated from the observational mortgage data) determines bank credit supply to firms and risk-taking in administrative data.

Object Details

• Language: Englisch

Classification and Topics

• Classification: Wirtschaft ; Banks; Depository Institutions; Micro Finance Institutions; Mortgages ; Money Supply; Credit; Money Multipliers ; Field Experiments
• Subject: credit demand ; credit supply ; bank lending channel ; household balance sheet channel ; mortgages ; SMEs ; risk-taking

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Michelangeli, Valentina ; Sette, Enrico ; Peydró, José-Luis
• Event: Veröffentlichung
• (who): ZBW – Leibniz Information Centre for Economics
• (where): Kiel, Hamburg
• (when): 2020

Further information

• Handle: http://hdl.handle.net/10419/222282
• Last update: 10.03.2025, 11:43 AM CET