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Credit rationing during credit supply shock: Insights from loan level data

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  • Michelson, Noam

Abstract

This paper examines bank credit allocation under an exogenous shock to credit supply within a stable financial system. The paper utilizes proprietary loan-level data collected from all Israeli commercial banks to examine how massive drawdowns on committed credit following the COVID-19 outbreak impacted credit supply, to firms without committed credit. Using the variation in drawdowns on committed credit across banks and data on firms borrowing from multiple banks, the study demonstrates that credit supply contracted more in banks that experienced larger drawdowns, resulting in a negative impact on the amount of credit granted to borrowers without committed credit. During this credit supply shortage, borrowers with longer relationships with their lending bank and alternative funding sources experienced more severe credit rationing.

Suggested Citation

  • Michelson, Noam, 2025. "Credit rationing during credit supply shock: Insights from loan level data," International Review of Economics & Finance, Elsevier, vol. 103(C).
    • Handle: RePEc:eee:reveco:v:103:y:2025:i:c:s1059056025006616
    DOI: 10.1016/j.iref.2025.104498
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    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G01 - Financial Economics - - General - - - Financial Crises
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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