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Liquidity Risk and the Credit Crunch of 2007-2008: Evidence from Micro-Level Data on Mortgage Loan Applications

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  • Adonis Antoniades

Abstract

Recent empirical studies have shown that during the financial crisis of 2007-2008 banks that were more heavily exposed to liquidity risk contracted their supply of credit more sharply. I contribute to the identification of this effect by relying on the use of micro-level data on US mortgage loan applications, which allows me to identify liquidity risk as an important determinant of the contraction of credit in the mortgage market, but as separate from the precipitous fall in credit demand, disruptions in the securitization and subprime markets, shifts in asset risk, and changing risk-aversion among loan officers.

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  • Adonis Antoniades, 2014. "Liquidity Risk and the Credit Crunch of 2007-2008: Evidence from Micro-Level Data on Mortgage Loan Applications," BIS Working Papers 473, Bank for International Settlements.
    • Handle: RePEc:bis:biswps:473
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    Cited by:

    1. Adonis Antoniades, 2015. "Commercial bank failures during The Great Recession: the real (estate) story," BIS Working Papers 530, Bank for International Settlements.
    2. Stefan Behrendt, 2016. "Taking Stock - Credit Measures in Monetary Transmission," Jena Economics Research Papers 2016-002, Friedrich-Schiller-University Jena.
    3. Alexis Antoniades & Charles W. Calomiris, 2018. "Mortgage Market Credit Conditions and U.S. Presidential Elections," NBER Working Papers 24459, National Bureau of Economic Research, Inc.
    4. Nilufer Ozdemir, 2020. "Liquidity Risk Management of Affiliated Banks during the Sub-prime Mortgage Crisis," The Review of Finance and Banking, Academia de Studii Economice din Bucuresti, Romania / Facultatea de Finante, Asigurari, Banci si Burse de Valori / Catedra de Finante, vol. 12(1), pages 31-47, June.
    5. Antoniades, Alexis & Calomiris, Charles W., 2020. "Mortgage market credit conditions and U.S. Presidential elections," European Journal of Political Economy, Elsevier, vol. 64(C).

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    Keywords

    liquidity risk; bank lending channel; credit lines; core deposits; mortgage credit;
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