IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper

Lending Cycles

  • Patrick Asea

    (UCLA & NBER)

  • S. Brook Blomberg

    (Wellesley College)

We investigate the lending behavior of banks by exploiting a rich oanel dataset on the contract terms of approximately two million commercial and industrial loans granted by 580 banks between 1977-1993. Using a Markov switching panel model we demonstrate that banks change their lending standards - from tightness to laxity - systematically over the cycle. We then use an efficient minimum chi-square estimator.

(This abstract was borrowed from another version of this item.)

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.econ.ucla.edu/workingpapers/wp764.pdf
Download Restriction: no

Paper provided by UCLA Department of Economics in its series UCLA Economics Working Papers with number 764.

as
in new window

Length:
Date of creation: 01 Jun 1997
Date of revision:
Handle: RePEc:cla:uclawp:764
Contact details of provider: Web page: http://www.econ.ucla.edu/

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Robert G. King & Charles I. Plosser, 1989. "Real business cycles and the test of the Adelmans," Proceedings, Federal Reserve Bank of San Francisco.
  2. Nelson, Charles R. & Plosser, Charles I., 1982. "Trends and random walks in macroeconmic time series : Some evidence and implications," Journal of Monetary Economics, Elsevier, vol. 10(2), pages 139-162.
  3. Roger E. A. Farmer, 1990. "AIL Theory and the Ailing Phillips Curve: A Contract-Based Approach to Aggregate Supply," NBER Chapters, in: Asymmetric Information, Corporate Finance, and Investment, pages 207-230 National Bureau of Economic Research, Inc.
  4. Newey, Whitney K., 1987. "Efficient estimation of limited dependent variable models with endogenous explanatory variables," Journal of Econometrics, Elsevier, vol. 36(3), pages 231-250, November.
  5. Hamilton, James D., 1990. "Analysis of time series subject to changes in regime," Journal of Econometrics, Elsevier, vol. 45(1-2), pages 39-70.
  6. Smith, B.D., 1990. "Sectoral Employment And Cyclical Fluctuations In An Adverse Selection Model," RCER Working Papers 218, University of Rochester - Center for Economic Research (RCER).
  7. Benjamin M. Friedman, 1984. "Money, Credit and Interest Rates in the Business Cycle," NBER Working Papers 1482, National Bureau of Economic Research, Inc.
  8. Stiglitz, Joseph E & Weiss, Andrew, 1981. "Credit Rationing in Markets with Imperfect Information," American Economic Review, American Economic Association, vol. 71(3), pages 393-410, June.
  9. Pagan, A.R. & Robertson, J.C., 1994. "Resolving the Liquidity Effect," Papers 277, Australian National University - Department of Economics.
  10. Hamilton, James D., 1996. "Specification testing in Markov-switching time-series models," Journal of Econometrics, Elsevier, vol. 70(1), pages 127-157, January.
  11. Berger, Allen N & Udell, Gregory F, 1992. "Some Evidence on the Empirical Significance of Credit Rationing," Journal of Political Economy, University of Chicago Press, vol. 100(5), pages 1047-77, October.
  12. Blomberg, S Brock, 1996. "Growth, Political Instability and the Defence Burden," Economica, London School of Economics and Political Science, vol. 63(252), pages 649-72, November.
  13. Dwight M. Jaffee & Thomas Russell, 1976. "Imperfect Information, Uncertainty, and Credit Rationing," The Quarterly Journal of Economics, Oxford University Press, vol. 90(4), pages 651-666.
  14. Bruce C. Greenwald & Joseph E. Stiglitz, 1993. "Financial Market Imperfections and Business Cycles," The Quarterly Journal of Economics, Oxford University Press, vol. 108(1), pages 77-114.
  15. Heckman, James J, 1978. "Dummy Endogenous Variables in a Simultaneous Equation System," Econometrica, Econometric Society, vol. 46(4), pages 931-59, July.
  16. Ben Bernanke, 1990. "The Federal Funds Rate and the Channels of Monetary Transnission," NBER Working Papers 3487, National Bureau of Economic Research, Inc.
  17. Simon Gilchrist & Ben S. Bernanke & Mark Gertler, 1994. "The financial accelerator and the flight to quality," Finance and Economics Discussion Series 94-18, Board of Governors of the Federal Reserve System (U.S.).
  18. Raghuram G. Rajan, 1994. "Why Bank Credit Policies Fluctuate: A Theory and Some Evidence," The Quarterly Journal of Economics, Oxford University Press, vol. 109(2), pages 399-441.
  19. Tauchen, George, 1985. "Diagnostic testing and evaluation of maximum likelihood models," Journal of Econometrics, Elsevier, vol. 30(1-2), pages 415-443.
  20. Gary Gorton & James Kahn, . "The Design of Bank Loan Contracts, Collateral, and Renegotiation (Revised: 2-96)," Rodney L. White Center for Financial Research Working Papers 1-93, Wharton School Rodney L. White Center for Financial Research.
  21. Stock, James H, 1987. "Measuring Business Cycle Time," Journal of Political Economy, University of Chicago Press, vol. 95(6), pages 1240-61, December.
  22. Roger E. A. Farmer, 1988. "Money and Contracts," Review of Economic Studies, Oxford University Press, vol. 55(3), pages 431-446.
  23. Roger E. A. Farmer, 1985. "Implicit Contracts with Asymmetric Information and Bankruptcy: The Effect of Interest Rates on Layoffs," Review of Economic Studies, Oxford University Press, vol. 52(3), pages 427-442.
  24. Benjamin M. Friedman, 1986. "Money, Credit, and Interest Rates in the Business Cycle," NBER Chapters, in: The American Business Cycle: Continuity and Change, pages 395-458 National Bureau of Economic Research, Inc.
  25. Christ, Carl F, 1971. "Econometric Models of the Financial Sector," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 3(2), pages 419-49, May.
  26. Newey, Whitney K, 1985. "Maximum Likelihood Specification Testing and Conditional Moment Tests," Econometrica, Econometric Society, vol. 53(5), pages 1047-70, September.
  27. Gourieroux, C & Laffont, J J & Monfort, A, 1980. "Coherency Conditions in Simultaneous Linear Equation Models with Endogenous Switching Regimes," Econometrica, Econometric Society, vol. 48(3), pages 675-95, April.
  28. Watson, Mark W, 1994. "Business-Cycle Durations and Postwar Stabilization of the U.S. Economy," American Economic Review, American Economic Association, vol. 84(1), pages 24-46, March.
  29. Brock, William A. & Sayers, Chera L., 1988. "Is the business cycle characterized by deterministic chaos?," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 71-90, July.
  30. Goldfeld, Stephen M. & Quandt, Richard E., 1973. "A Markov model for switching regressions," Journal of Econometrics, Elsevier, vol. 1(1), pages 3-15, March.
  31. Victor Zarnowitz, 1984. "Recent Work on Business Cycles in Historical Perspective: Review of Theories and Evidence," NBER Working Papers 1503, National Bureau of Economic Research, Inc.
  32. Hamilton, James D., 1988. "Rational-expectations econometric analysis of changes in regime : An investigation of the term structure of interest rates," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 385-423.
  33. John A. Weinberg, 1995. "Cycles in lending standards?," Economic Quarterly, Federal Reserve Bank of Richmond, issue Sum, pages 1-18.
  34. Hansen, B.E., 1991. "The Likelihood Test Under Non-Standard Conditions: Testing the Markov Trend Model of GNP," RCER Working Papers 279, University of Rochester - Center for Economic Research (RCER).
  35. Hamilton, James D, 1989. "A New Approach to the Economic Analysis of Nonstationary Time Series and the Business Cycle," Econometrica, Econometric Society, vol. 57(2), pages 357-84, March.
  36. Gary Gorton & James A. Kahn, 1993. "The Design of Bank Loan Contracts, Collateral, and Renegotiation," NBER Working Papers 4273, National Bureau of Economic Research, Inc.
  37. Jovanovic, Boyan, 1988. "Observable Implications Of Models With Multiple Equilibria," Working Papers 88-20, C.V. Starr Center for Applied Economics, New York University.
  38. Zarnowitz, Victor, 1985. "Recent Work on Business Cycles in Historical Perspective: A Review of Theories and Evidence," Journal of Economic Literature, American Economic Association, vol. 23(2), pages 523-80, June.
  39. Boldin, Michael D, 1994. "Dating Turning Points in the Business Cycle," The Journal of Business, University of Chicago Press, vol. 67(1), pages 97-131, January.
  40. Blough, Stephen R, 1992. "The Relationship between Power and Level for Generic Unit Root Tests in Finite Samples," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 7(3), pages 295-308, July-Sept.
  41. Stephen D. Williamson, 1984. "Costly Monitoring, Financial Intermediation, and Equilibrium Credit Rationing," Working Papers 583, Queen's University, Department of Economics.
  42. Neftci, Salih N, 1984. "Are Economic Time Series Asymmetric over the Business Cycle?," Journal of Political Economy, University of Chicago Press, vol. 92(2), pages 307-28, April.
  43. Cosslett, Stephen R. & Lee, Lung-Fei, 1985. "Serial correlation in latent discrete variable models," Journal of Econometrics, Elsevier, vol. 27(1), pages 79-97, January.
  44. David de Meza & David C. Webb, 1987. "Too Much Investment: A Problem of Asymmetric Information," The Quarterly Journal of Economics, Oxford University Press, vol. 102(2), pages 281-292.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:cla:uclawp:764. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Tim Kwok)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.