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Missing the cut? How threshold effects distort U.S. small business lending trends

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  • Heil, Mark

Abstract

This paper estimates a downward bias over time in official U.S. lending data series widely used to proxy credit flows to small businesses. The bias occurs because the upper loan origination size threshold used to proxy this lending is fixed and denominated in nominal currency, so its real value erodes over time due to inflation. Some advocates invoke the apparent declining small business lending trend to push governments to implement support programs for these businesses. The paper offers preliminary fully inflation-adjusted multipliers applicable to nominal lending data so that analysts may observe more accurate trends and better inform policy decisions.

Suggested Citation

  • Heil, Mark, 2019. "Missing the cut? How threshold effects distort U.S. small business lending trends," Finance Research Letters, Elsevier, vol. 28(C), pages 82-86.
  • Handle: RePEc:eee:finlet:v:28:y:2019:i:c:p:82-86
    DOI: 10.1016/j.frl.2018.04.005
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    References listed on IDEAS

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    1. Scott Shane & Ann Marie Wiersch, 2013. "Why small business lending isn’t what it used to be," Economic Commentary, Federal Reserve Bank of Cleveland, issue Aug.
    2. Courtney M. Carter & Traci L. Mach & Cailin R. Slattery, 2014. "Peer-to-peer lending to small businesses," Finance and Economics Discussion Series 2014-10, Board of Governors of the Federal Reserve System (U.S.).
    3. Karen Mills & Brayden McCarthy, 2014. "The State of Small Business Lending: Credit Access during the Recovery and How Technology May Change the Game," Harvard Business School Working Papers 15-004, Harvard Business School.
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    Cited by:

    1. Tao, Xiaobo & Li, Sijing, 2020. "The developing influence of Chinese culture on finance: A literature review and case-study illustration," Research in International Business and Finance, Elsevier, vol. 54(C).

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