Listening to the Market: Estimating Credit Demand and Supply from Survey Data
The literature referring to the credit slowdown has been plagued by the identification problem of whether a decline in a bank's credit is derived from the demand or the supply side. This paper proposes an original approach in directly estimating the credit demand and the credit supply from survey data. Using the TANKAN and the recently published Senior Loan Officer survey data, the paper demonstrates that the observed lending amount did not change much during the period of study; however, the observed lending amount deviated, as one might expect, from the estimated credit demand and credit supply for every firm size. This credit mismatch presents evidence of credit market imperfections and is of interest for further investigation as a possible explanation of firms' liquidity constraints and banks' lending mechanisms.
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