Working Paper: NBER ID: w16595
Authors: Gabriel Jiménez; Atif R. Mian; José Luis Peydró; Jesse Saurina
Abstract: While banks may change their supply of credit due to bank balance sheet shocks (the local lending channel), firms can react by adjusting their sources of financing in equilibrium (the aggregate lending channel). We formalize a methodology for separately estimating these effects. We estimate the local and aggregate lending channel effects of the banks' ability to securitize real estate assets on non-real estate firms in Spain. We show that equilibrium dynamics nullify the strong local lending channel effect on credit quantity for firms with multiple banking relationships. However, credit terms for these firms become significantly more favorable due to securitization. Securitization also leads to an expansion in credit on the extensive margin towards first-time bank clients, and these borrowers are significantly more likely to end up in default. Finally, the 2008 collapse in securitization leads to a reversal in local lending channel.
Keywords: Securitization; Credit Supply; Banking; Spain
JEL Codes: E44; G01; G21
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Securitization (G10) | Credit supply to non-real estate firms (G21) |
| Bank balance sheet shocks (F65) | Credit supply (E51) |
| Higher exposure to real estate (L85) | Credit growth for non-real estate firms (G21) |
| Firms with multiple banking relationships (G21) | Overall borrowing (H74) |
| Securitization (G10) | Credit quantity (E51) |
| Securitization (G10) | Credit terms (F34) |
| Collapse of the securitization market in 2008 (G33) | Local lending channel (G21) |