The Capital Crunch: Neither a Borrower nor a Lender Be
The dramatic reduction in the growth rate of bank lending associated with the 1990-91 recession, particularly in New England, has evoked claims by many observers of a credit crunch. To overcome the difficulty in determining whether the observed slow credit growth is a demand or supply phenomenon, the authors examine a cross-section of banks in New England that have experienced the same economic downturn, effectively controlling for changes in demand. They find empirical support for a capital crunch, whereby poorly capitalized institutions shrink more than their better-capitalized peers, indicating an independent role for credit supply. Copyright 1995 by Ohio State University Press.
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Volume (Year): 27 (1995)
Issue (Month): 3 (August)
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