Some Evidence on the Empirical Significance of Credit Rationing

Berger, Allen N.; Udell, Gregory F.

doi:10.1086/261851

Cited by 423 publications

(222 citation statements)

References 27 publications

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“…The Berger and Udell (1992) indicator represents a proxy for long-term business; those credit institutions that maintain close ties with their non-bank customers will adjust their lending rates comparatively less and slowly. Banks may offer implicit interest rate insurance to risk-averse borrowers in the form of below-market rates during periods of high market rates, for which the banks are later compensated when market rates are low.…”

Section: Bank Lending Channelmentioning

confidence: 99%

“…Credit relationship: ratio between long term loans and total loans (Berger and Udell, 1992) Measure for the "bank capital channel" Ex special credit institutions, foreign banks and "banche di credito cooperativo" are excluded. The sample represents more than 70 per cent of total system in terms of lending.…”

Section: Appendix 1 -A Simple Theoretical Modelmentioning

confidence: 99%

“…bonds) will adjust their deposit rates more (and more quickly) than banks whose liabilities are less affected by market movements. Berger and Udell (1992) sustain that banks that maintain a close tie with their customers will change their lending rates comparatively less and slowly.…”

Section: Introductionmentioning

confidence: 99%

See 2 more Smart Citations

How do banks set interest rates?

Gambacorta

2008

European Economic Review

435

145

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The aim of this paper is to study cross-sectional differences in banks interest rates. It adds to the existing literature in two ways. First, it analyzes in a systematic way both micro and macroeconomic factors that influence the price setting behavior of banks. Second, by using banks' prices (rather than quantities) it provides an alternative way to disentangle loan supply from loan demand shift in the "bank lending channel" literature. The results, derived from a sample of Italian banks, suggest that heterogeneity in the banking rates pass-through exists only in the short run. Consistently with the literature for Italy, interest rates on short-term lending of liquid and well-capitalized banks react less to a monetary policy shock. Also banks with a high proportion of long-term lending tend to change their prices less. Heterogeneity in the pass-through on the interest rate on current accounts depends mainly on banks' liability structure. Bank's size is never relevant.

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Section: Bank Lending Channelmentioning

confidence: 99%

Section: Appendix 1 -A Simple Theoretical Modelmentioning

confidence: 99%

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How do banks set interest rates?

Gambacorta

2008

European Economic Review

435

145

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“…Customers would then hesitate to change banks because of this agreement. Similarly, Berger and Udell (1992) highlight the role played by implicit contracts for which banks interested in long-term relationships are willing to offer more stable interest rates. All these kinds of agreements result in stickier retail rates.…”

mentioning

confidence: 99%

Interest rate pass-through in the Dominican Republic

Grigoli

Mota

2017

Lat Am Econ Rev

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A well-functioning monetary transmission mechanism is critical for monetary policy. As the Dominican Republic recently adopted an inflation targeting regime, it is even more relevant to guarantee that changes in the monetary policy rates are quickly and fully reflected in retail rates, to eventually influence aggregate demand and inflation. This paper estimates the interest rate pass-through of the monetary policy rate to retail rates and explores asymmetries in the adjustment. We find evidence of complete pass-through to retail rates, confirming the effectiveness of the monetary policy transmission mechanism. However, our results also suggest a faster pass-through to lending rates than to deposit rates and asymmetric adjustments of short-term rates, as deposit rates respond faster to policy rate cuts and lending rates respond faster to policy rate hikes. Measures to enhance competition in the financial system could help to achieve a symmetric adjustment of retail rates.

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“…25 One explanation for the imperfection in the loan market is the existence of long-term relationships between banks and customers, which are typical for a bank-based financial system as opposed to a market-based financial system. See, for example, Fried and Howitt (1980) and Berger and Udell (1992).…”

Section: A Selected Review Of the Literaturementioning

confidence: 99%

Business Cycle Effects of Credit Shocks in a DSGE Model with Firm Defaults

Pesaran

2016

SSRN Journal

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This paper proposes a theoretical framework to analyze the relationship between credit shocks, firm defaults and volatility, and to study the impact of credit shocks on business cycle dynamics. Firms are identical ex ante but differ ex post due to different realizations of firm-specific technology shocks, possibly leading to default by some firms. The paper advances a new modelling approach for the analysis of firm defaults and financial intermediation that takes account of the financial implications of such defaults for both households and banks. Results from a calibrated version of the model suggest that, in the steady state, a firm's default probability rises with its leverage ratio and the level of uncertainty in the economy. A positive credit shock, defined as a rise in the loan-todeposit ratio, increases output, consumption, hours and productivity, and reduces the spread between loan and deposit rates. The effects of the credit shock tend to be highly persistent, even without price rigidities and habit persistence in consumption behavior. JEL classification: E32, E44, G21 Bank classification: Business fluctuations and cycles; Economic models; Credit and credit aggregates; Financial institutions RésuméLes auteurs proposent un modèle théorique pour l'analyse de la relation entre les chocs de crédit, les défaillances d'entreprises et la volatilité, ainsi que pour l'étude des effets de ces chocs sur la dynamique du cycle économique. Dans ce modèle, des entreprises identiques ex ante se différencient ex post en réponse aux chocs technologiques réalisés, qui sont propres à chaque entreprise et peuvent provoquer sa défaillance. Le nouveau modèle employé par les auteurs pour examiner les défaillances des firmes et l'intermédiation financière tient compte des conséquences financières de ces défaillances à la fois sur les ménages et sur les banques. Les résultats tirés d'une version étalonnée du modèle indiquent qu'à l'équilibre de long terme, la probabilité de défaut d'une entreprise augmente avec son ratio de levier et le degré d'incertitude dans l'économie. Un choc de crédit positif -à savoir une hausse du ratio des prêts aux dépôts -accroît la production, la consommation, le nombre d'heures travaillées et la productivité et réduit l'écart entre le taux prêteur et le taux de rémunération des dépôts. Les retombées du choc de crédit tendent à perdurer longtemps même en l'absence de rigidité des prix et de persistance des habitudes de consommation.

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Some Evidence on the Empirical Significance of Credit Rationing

Cited by 423 publications

References 27 publications

How do banks set interest rates?

How do banks set interest rates?

Interest rate pass-through in the Dominican Republic

Business Cycle Effects of Credit Shocks in a DSGE Model with Firm Defaults

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