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Firm-Level Evidence of Shifts in the Supply of Credit

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  • Holmberg, Karolina

    ()
    (Monetary Policy Department, Central Bank of Sweden)

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    Abstract

    Using panel data of 68,800 small and large firms, I examine whether firms are subject to shifts in the supply of credit over the business cycle. Shifts in the supply of credit are identified by exploring how firms substitute between commitment credit - lines of credit - and non-commitment credit. I find that firms on average rely more on commitment credits when monetary policy is tight and when the financial health of banks is weaker. The results are consistent with a bank lending channel of monetary policy and with shifts in the supply of credit following deteriorations in banks' balance sheets.

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    File URL: http://www.riksbank.se/Documents/Rapporter/Working_papers/2013/rap_wp280_131118.pdf
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    Bibliographic Info

    Paper provided by Sveriges Riksbank (Central Bank of Sweden) in its series Working Paper Series with number 280.

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    Length: 41 pages
    Date of creation: 01 Nov 2013
    Date of revision:
    Handle: RePEc:hhs:rbnkwp:0280

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    Postal: Sveriges Riksbank, SE-103 37 Stockholm, Sweden
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    Keywords: Bank Lending Channel; Bank Capital; Business Fluctuations;

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    1. Ben S. Bernanke & Mark Gertler, 1995. "Inside the Black Box: The Credit Channel of Monetary Policy Transmission," NBER Working Papers 5146, National Bureau of Economic Research, Inc.
    2. Lins, Karl V. & Servaes, Henri & Tufano, Peter, 2010. "What drives corporate liquidity? An international survey of cash holdings and lines of credit," Journal of Financial Economics, Elsevier, vol. 98(1), pages 160-176, October.
    3. Bernanke, Ben & Gertler, Mark & Gilchrist, Simon, 1994. "The Financial Accelerator and the Flight to Quality," Working Papers 94-24, C.V. Starr Center for Applied Economics, New York University.
    4. Piti Disyatat, 2010. "The bank lending channel revisited," BIS Working Papers 297, Bank for International Settlements.
    5. Bernanke, Ben S & Blinder, Alan S, 1992. "The Federal Funds Rate and the Channels of Monetary Transmission," American Economic Review, American Economic Association, vol. 82(4), pages 901-21, September.
    6. Evan Gatev & Philip E. Strahan, 2006. "Banks' Advantage in Hedging Liquidity Risk: Theory and Evidence from the Commercial Paper Market," Journal of Finance, American Finance Association, vol. 61(2), pages 867-892, 04.
    7. Kashyap, Anil K & Stein, Jeremy C & Wilcox, David W, 1993. "Monetary Policy and Credit Conditions: Evidence from the Composition of External Finance," American Economic Review, American Economic Association, vol. 83(1), pages 78-98, March.
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