Banking Credit

Fan Liang

This paper asks why small firms hold large quantities of liquid assets — cash and cash equivalents that earn low or negative real returns — even when external credit is available. The conventional …

Ana Fostel · John Geanakoplos · Gregory Phelan

The paper asks why large gross financial flows exist between similarly rich countries (especially the U.S. and Europe), why financial integration raises rather than lowers asset price volatility, and …

Mitali Das · Gita Gopinath · Helene Hall · Taehoon Kim · Jeremy C. Stein

This paper investigates why non-U.S. central banks accumulate large holdings of dollar-denominated foreign exchange reserves, focusing on a previously under-emphasized motive: the currency mismatch of …

Carlo Altavilla · Giacomo Carboni · Michele Lenza · Harald Uhlig

This paper asks whether uncertainty in the interbank market — distinct from general macroeconomic uncertainty — raises the cost of bank credit to firms, and whether bank-specific characteristics …

Jianjun Miao · Zhouxiang Shen · Dongling Su

This paper asks how bank holdings of long-term government securities interact with interest-rate-driven monetary tightening to amplify macroeconomic downturns and generate banking crises. The …

Giovanni Cespa · Xavier Vives

The paper asks why market liquidity sometimes behaves in a stabilizing way (an illiquidity hike curbs liquidity demand and attracts liquidity supply) but on other occasions "evaporates when it is most …

Christiaan van der Kwaak

When central banks pay interest on reserves — as the Federal Reserve has done since October 2008 and as is standard operating procedure today — does financing fiscal stimulus by permanently expanding …

Salomon Garcia-Villegas

This paper develops a quantitative general equilibrium model of the U.S. housing finance system that jointly determines mortgage credit and mortgage-backed security (MBS) issuance, with the aim of …

Kee-Youn Kang · Zijian Wang

Research question and motivation: Digital payments generate vast, high-frequency, transaction-level data that several central banks (Bank of Canada, Swiss National Bank, Eurosystem members) already …

Eunkyung Lee

Research question and motivation. This paper asks how monetary policy transmits to corporate investment through bank credit, and specifically whether the relevant credit margin is the origination of …

Behzad Diba · Olivier Loisel

Since 2008 the US economy has gone through two zero-lower-bound (ZLB) episodes (Dec 2008–Dec 2015 and Mar 2020–Mar 2022). Standard New Keynesian (NK) and monetarist models struggle with three broad …

Peter Bednarek · Valeriya Dinger · Alison Schultz · Natalja von Westernhagen

Can banks effectively monitor their peers under asymmetric information? Effective peer monitoring matters for functioning interbank markets and, by implication, financial markets and the transmission …

Philippe Bacchetta · Elena Perazzi

As central banks worldwide explore retail central bank digital currency (CBDC), the macroeconomic consequences depend heavily on how CBDC interacts with bank deposits. Prior work spans a wide range of …

Christiaan van der Kwaak · Sweder van Wijnbergen

Does fiscal stimulus still work when it is financed through a banking system that is undercapitalized and holds large quantities of risky domestic government bonds? This was a first-order policy …

Ryuichiro Izumi · Yang Li

Research question and motivation: Asset fire sales were a defining feature of the 2007-08 crisis, and post-crisis reforms (Basel III liquidity requirements, Money Market Mutual Fund reforms) were …

Hiona Balfoussia · Harris Dellas · Dimitris Papageorgiou

This paper studies a transmission channel from sovereign fiscal weakness to banking performance that the literature has largely overlooked: government-provided deposit insurance, rather than banks' …

Luís A.V. Catão · Jan Ditzen · Daniel Marcel te Kaat

The paper asks how far global factors drive the foreign-borrowing component of advanced-economy banks' non-core funding, and whether exchange rate flexibility (and macroprudential policy) can insulate …

Antoine L. Noël · Hongfei Sun

Noël and Sun build an information-based theory of capital structure designed to explain the diversity of observed firm financing behavior and the coexistence of distinct optimal financial contracts. …

Charles M. Kahn · David Marshall · Robert L. McDonald

This paper develops a theoretical model to explain why financial markets can suffer self-fulfilling liquidity crises and how a central bank acting as a "market-maker of last resort" (MMLR) can …

Cecilia Dassatti · Rodrigo Lluberas · Francesc Rodriguez-Tous

Research question and motivation. Banks reluctant to recognize losses on troubled borrowers engage in "loan evergreening"—rolling over or extending credit to delay loss recognition.

Álvaro Fernández-Gallardo · Iván Payá

There is now broad consensus that monetary authorities should hold a financial-stability mandate and that macroprudential policy should be part of it, yet evidence on the macroeconomic effectiveness …

Rodrigo Barbone Gonzalez · João Barata Ribeiro Blanco Barroso · Bernardus Ferdinandus Nazar Van Doornik

Reserve requirements (RRs) were largely abandoned as a monetary tool in advanced economies after inflation targeting, but emerging markets (EMs) — especially Brazil — kept using them countercyclically …

Hidehiko Matsumoto

Emerging economies have rapidly accumulated foreign-currency (mostly dollar) debt — the dollar share of 14 emerging economies' foreign debt rose from 75% in 2010 to 81% in 2018. Such debt is dangerous …

Thorsten Beck · Peter Bednarek · Daniel te Kaat · Natalja von Westernhagen

The paper asks how exchange rate movements affect the real economy and what role the banking system's foreign-asset exposure plays in transmitting exchange rate shocks. The motivation is concrete: …

Agustín Bénétrix · Michael Curran

How does country-specific uncertainty explain variation in the cross-border funding of banks? Studying this link is practically relevant given rising reliance on international borrowing under …

Pasqualina Arca · Gianfranco Atzeni · Luca G. Deidda

Research question and motivation: Under U.S. Chapter 7 bankruptcy, an individual entrepreneur has most unsecured debt discharged and only her non-exempt assets liquidated, producing an "insurance …

Masami Imai · Michiru Sawada

Why do financial crises leave such deep and protracted economic wounds, with crisis-stricken economies failing to revert to pre-crisis growth trends even a decade later? Imai and Sawada test one …

Carlo Altavilla · Refet S. Gürkaynak · Rogier Quaedvlieg

This paper establishes basic facts about the external finance premium (EFP) faced by euro area firms borrowing from banks, and studies how monetary policy is transmitted to it. The EFP — the extra …

Ricardo Duque Gabriel

Research question and motivation. Public procurement accounts for roughly one-third of government spending (12.6% of GDP and 30% of total government expenditures in OECD countries in 2019).

Marius Clemens · Stefan Gebauer · Tobias König

Research question and motivation: The first two pillars of the European Banking Union (single supervision and single resolution) are in place, but the third pillar — a European deposit insurance …

Allen N. Berger · Onesime Epouhe · Raluca A. Roman

This paper examines the effects of the Troubled Asset Relief Program (TARP) and the Paycheck Protection Program (PPP)—two government bailout programs during the Global Financial Crisis and the …

Daria Finocchiaro · Philippe Weil

Finocchiaro and Weil ask whether financial development necessarily promotes long-run economic growth, or whether congestion externalities in R&D markets can offset — and even reverse — the growth …

Jess Benhabib · Feng Dong · Pengfei Wang · Zhenyang Xu

Why do corporate defaults cluster in recurring episodes rather than occurring smoothly? The paper asks whether observable fundamental factors — firm characteristics and macroeconomic variables — are …

Vitaly M. Bord · Agnes Kovacs · Patrick Moran

Should regulators restrict banks from proactively raising credit card limits using machine-learning algorithms, and if so, how? The paper asks: to what extent are bank-initiated credit limit increases …

Cooper Howes · Gregory Weitzner

Banks produce private information about borrowers that is inherently unobservable to outside researchers. Howes and Weitzner ask whether the quality of this private information is countercyclical — …

Wouter J. den Haan · Steven W. Sumner · Guy M. Yamashiro

This 2007 Journal of Monetary Economics paper by Wouter den Haan, Steven Sumner, and Guy Yamashiro asks whether the three main categories of U.S. bank loans -- commercial and industrial (C&I), real …

Sang Rae Kim

This paper studies when a bank is more effective as a supplier of privately produced money-like safe assets (repo, commercial paper), finding that a bank produces safer, more liquid assets when (1) …

Douglas W. Diamond · Philip H. Dybvig

A three-period model in which households face a privately observed, uninsurable risk of needing to consume early, and where a demand deposit contract lets banks share that risk better than any market …

David Rivero · Hugo Rodríguez Mendizábal

This paper demonstrates that the canonical efficiency result of Diamond and Dybvig (1983) — that banks using maturity transformation can decentralize the first-best risk-sharing allocation — breaks …

Gita Gopinath · Jeremy C Stein

A currency's role as the unit of account in which trade is invoiced and its role as a safe store of value reinforce each other, because households who buy dollar-priced imports want dollar-denominated …

Elliot Anenberg · Tess Scharlemann · Eileen van Straelen

Does monetary policy stimulate household borrowing and consumption by enabling cash-out mortgage refinancing ("the cash-out refinance channel"), or does it primarily induce substitution across …

Valentina Bruno · Hyun Song Shin

Bank leverage is the linchpin of a risk-taking channel through which monetary policy travels across borders: in a pre-crisis quarterly VAR a tighter US policy rate raises the VIX, lowers broker-dealer …

Federico Apicella · Andrea Fabiani

Using the November 2017 EU Emissions Trading System reform, which pushed permit prices from about 5 to 20 euros per tonne, and loan-level data from the Italian Credit Registry, this paper asks whether …

Francesco Lippi · Elia Moracci

Lippi and Moracci (2026) ask how euro area households choose between cash and card payments, and whether existing theoretical models can explain observed behavior. They draw on ECB payment diary …

Hanfeng Chen · Maria Elena Filippin

The paper analyzes the implications of introducing a retail central bank digital currency (CBDC) that competes with commercial bank deposits for household liquidity, in a model where banks must post …

Francesco Giovanardi · Matthias Kaldorf

This paper asks two related questions about the intersection of climate policy and bank capital regulation. First, can differentiated bank capital requirements — imposing higher equity charges on …

Marco Cosconati · Yi Xin · Fan Wu · Yizhou Jin

This paper studies imperfect competition in selection markets where competing firms have heterogeneous information about consumers — a layer of asymmetry distinct from the classic buyer-seller …

Kristine W. Hankins · Morteza Momeni · David Sovich

Do import tariffs affect consumer credit terms, and does focusing solely on goods prices understate tariff pass-through to consumers? The paper also asks whether vertical integration -- specifically, …

Sara G Castellanos · Diego Jiménez-Hernández · Aprajit Mahajan · Eduardo Alcaraz Prous · Enrique Seira

This paper asks two related questions bearing on financial inclusion policy in developing countries: (1) How effective are credit card contract term changes — specifically interest rate reductions and …

Fabian Gogolin · Ivan Lim · Francesco Vallascas

This paper studies what happens to local banking markets when a small bank suffers a successful cyberattack, using a stacked difference-in-differences design on 16 cyber incidents at small U.S. banks …

Francesco Ferrante · Nils Gornemann

Ferrante and Gornemann study the aggregate and redistributive effects of currency devaluations in emerging market economies, focusing on a feature that prior open-economy HANK models had not jointly …

Stephen G. Cecchetti

This 1995 Federal Reserve Bank of St. Louis Review paper by Stephen Cecchetti surveys the empirical literature attempting to distinguish two competing theories of how monetary policy affects the real …

Daniel L. Greenwald · Adam Guren

To what extent did an expansion and contraction of credit drive the 2000s housing boom and bust? The existing literature offers sharply divergent answers — ranging from credit explaining virtually …

Lee K. Davison · Carlos D. Ramirez

Does deposit insurance promote financial depth by arresting the outflow of deposits from the banking system during periods of bank distress? The paper tests and quantifies the deposit-stabilizing …

Alessandra Peter

Most quantitative models of entrepreneurship assume that large firms are widely held and unconstrained; this paper documents that across the Eurozone they are frequently not, and asks what that …

Stefan Avdjiev · Cathérine Koch · Hyun Song Shin

Across four econometric approaches and up to 114 borrowing countries, a stronger international funding currency goes with less cross-border bank lending denominated in that currency: a one percentage …

Sergio Correia · Stephan Luck · Emil Verner

Correia, Luck, and Verner ask a foundational question in banking: why do banks fail? Specifically, they seek to adjudicate between two theoretical views — the solvency view (failures caused by …

Renato Faccini · Seungcheol Lee · Ralph Luetticke · Morten O. Ravn · Tobias Renkin

How do consumer credit spreads — the gap between household borrowing rates and deposit rates — affect aggregate business cycle dynamics and the distribution of consumption across the wealth …

Yu-Ting Chiang · Piotr Zoch

This paper develops a sufficient statistics approach to measuring the aggregate demand effects of financial intermediation disturbances — shocks to the ability of financial intermediaries to supply …

Kirstin Hubrich · Yves S. Schüler · Daniel Waggoner

This paper investigates the role of leverage of financial institutions in amplifying the transmission of financial shocks to the macroeconomy, with particular attention to whether that amplification …

Wenhao Li · Ye Li

Crises have cleansing effects—low-quality firms face greater financial shortfalls and invest less than high-quality firms—but public credit support dampens these effects by reducing financing cost …

Emanuele Ciola · Gabriele Tedeschi

This paper investigates how the endogenous structure of credit, deposit, and interbank networks shapes business cycle fluctuations and large financial crises in the U.S. economy.

Markus Hertrich · Daniel Nathan

This paper uses confidential daily data on the Bank of Israel's (BOI) foreign exchange purchase program in the USD/Israeli new shekel (ILS) spot market from 2013 to 2019 to study how FX interventions …

Emmanuel De Veirman · Jasper De Jong

De Veirman and de Jong develop a new approach to estimating the macroeconomic effects of changes in regulatory loan-to-value (LTV) limits on mortgage loans. The central questions are: (1) how do …

Kristian S. Blickle · Sarah N. Hamerling · Donald P. Morgan

Using FEMA disaster declarations matched to SHELDUS property-damage estimates and Call Report data for 1995–2018, this paper finds that weather disasters — even at their most severe — have had modest …

Rodney J. Garratt · Zhentong Lu · Phoebe Tian

This paper uses detailed transaction-level data from Canada's new high-value payment system (HVPS) to show how participants save liquidity by strategically exploiting the gridlock resolution …

Sebastian Doerr · Thomas Drechsel · Donggyu Lee

The paper establishes a causal link from rising top income shares to reduced net job creation at small firms, working through a bank funding channel rooted in non-homothetic household portfolio …

Paul H S Kim · Anran Li

Kim and Li study how publicly provided reinsurance affects insurer behavior and market outcomes in health insurance markets where firms face substantial cost uncertainty. The central question is …

Julian di Giovanni · Şebnem Kalemli-Özcan · Mehmet Fatih Ulu · Yusuf Soner Baskaya

Using the universe of Turkish corporate credit transactions matched to bank balance sheets over 2003-13, this paper shows that an easing of global financial conditions lowers domestic borrowing costs …

Chun-Che Chi

This paper studies how the lender structure of external debt — specifically, the degree to which a borrowing country's external debt is concentrated among a small number of large lenders — affects …

Daniel Björkegren · Joshua E. Blumenstock · Samsun Knight

This paper addresses the problem of algorithmic manipulation: when consequential decisions are encoded in machine learning algorithms, individuals strategically alter their behavior to achieve desired …

George J. Bratsiotis · Kasun D. Pathirage

This paper introduces a four-agent estimated New Keynesian DSGE model—comprising banked simple households, underbanked simple households, firm owners, and bank owners—to examine agent-specific and …

Mark Gertler · Simon Gilchrist

This 1994 Quarterly Journal of Economics paper by Mark Gertler and Simon Gilchrist asks whether small manufacturing firms bear a disproportionate share of the manufacturing decline that follows …

Camelia Minoiu · Rebecca Zarutskie · Andrei Zlate

Minoiu, Zarutskie, and Zlate ask whether participation in the Main Street Lending Program (MSLP)—a Federal Reserve emergency facility launched in mid-2020 to channel credit to small and mid-sized …

Ben S. Bernanke

Complementing Friedman and Schwartz's monetary account of the Great Depression, Bernanke argues that the banking panics and pervasive debtor insolvency of 1930-33 independently raised the real cost of …

Paolo Gelain · Marco Lorusso

This paper estimates the effect of oil price fluctuations on US banking variables using a Bayesian SVAR with sign restrictions following Baumeister and Hamilton (2019). Oil market shocks that lead to …

Árpád Ábrahám · Eva Carceles-Poveda · Yan Liu · Ramon Marimon

This paper asks how to optimally design a Financial Stability Fund (Fund) for a union of sovereign countries that must simultaneously (i) prevent sovereign default, (ii) provide risk-sharing and …

Chenyu Shan · Dragon Yongjun Tang · Wenya Wang

Third-party loan guarantees—in which a fee-charging guarantor formally guarantees a bank loan and conducts its own due diligence on the borrower—are present in approximately 10% of Chinese bank loans …

Yuteng Cheng · Ryuichiro Izumi

This paper examines how the degree of user anonymity built into a central bank digital currency (CBDC) affects bank lending decisions and what this implies for the optimal design of CBDC anonymity. …

Matthew Baron · Luc Laeven · Julien Pénasse · Yevhenii Usenko

This paper investigates two interrelated questions about historical banking crises: (1) whether bank losses during banking crises are primarily temporary or permanent in nature, and (2) whether policy …

Scott T. Nelson

The 2009 Credit Card Accountability Responsibility and Disclosure (CARD) Act barred credit card lenders from discretionarily raising borrowers' interest rates in response to new information. Using the …

Kenan Huremović · Gabriel Jiménez · Enrique Moral-Benito · José-Luis Peydró · Fernando Vega-Redondo

This paper provides the first integrated empirical analysis of how bank credit supply shocks propagate through both the production network and the financial network simultaneously, using the universe …

Wenxin Du · Kristin Forbes · Matthew Luzzetti

Drawing on the recent experience of seven advanced-economy central banks, this paper offers the first cross-country assessment of quantitative tightening (QT) — the unwinding of bond holdings …

Pedro Bordalo · Nicola Gennaioli · Andrei Shleifer · Stephen J. Terry

This paper incorporates diagnostic expectations — beliefs that overweight the representativeness of recent data, formalized as $E_t^\theta(A_{t+1}) = E_t(A_{t+1}) + \theta[E_t(A_{t+1}) - …

José E. Gutiérrez

This paper provides a contract-theoretic rationale for the special liquidity regulation of bank credit lines—a form of lending that has received little attention in the regulatory literature despite …

Johnny Tang

This paper quantitatively assesses the consequences of jurisdictional competition in the US life insurance industry, an $8 trillion market. The central question is whether competition between state …

Anna Grodecka-Messi · Jieying Li · Xin Zhang

This paper investigates how rising house prices affect the composition of household debt portfolios in Sweden during 2010–2014. Specifically, the authors ask whether homeowners who experience housing …

Giulia Brancaccio · Karam Kang

This paper investigates whether intermediaries in the U.S. municipal bond market strategically exploit product design to increase search frictions and, through that channel, capture rents. …

Ivan T Ivanov · Luke Pettit · Toni M Whited

Does corporate income taxation raise or lower corporate leverage? The canonical Modigliani-Miller (1963) view holds that the interest tax deduction makes debt more attractive, predicting a positive …

Benjamin L. Collier · Cameron M. Ellis · Benjamin J. Keys

This paper estimates the shadow cost that consumers assign to pledging their primary residence as collateral, using administrative loan application and performance data from the U.S. Federal Disaster …

Xiaoming Li · Zheng Liu · Yuchao Peng · Zhiwei Xu

This paper asks how changes in the composition (not the size) of Chinese local government debt influence bank risk-taking, credit allocation between privately owned enterprises (POEs) and state-owned …

Stefan Avdjiev · Wenxin Du · Cathérine Koch · Hyun Song Shin

The strength of the US dollar, the size of covered interest parity deviations and the growth of dollar-denominated cross-border bank lending move together in what the authors call a triangular …

Panagiotis Avramidis · George G. Pennacchi

Using 2001-2022 annual data on U.S. commercial and savings banks matched with county-level demographic data, this paper shows that banks operating in areas with older populations—measured by the …

Raymond Kluender · Neale Mahoney · Francis Wong · Wesley Yin

This paper asks whether relieving downstream medical debt — debt that has been sold to third-party debt collectors — causes improvements in financial outcomes, mental and physical health, and …

Ivan Lim · Jens Hagendorff · Seth Armitage

Using closures of U.S. bank regulatory offices between 2002 and 2013 as difference-in-differences shocks to the physical proximity between supervisors and the community banks they oversee, the paper …

Bernardo Morais · José-Luis Peydró · Jessica Roldán-Peña · Claudia Ruiz-Ortega

Using the universe of business loans in Mexico matched to firm and bank balance sheets, this paper shows that each foreign monetary policy moves local credit supply mainly through banks headquartered …

Yuliyan Mitkov · Ulrich Schüwer

This paper documents that U.S. metropolitan statistical areas with higher income inequality have a larger share of failed banks, higher average bank default probabilities, and greater dispersion of …

Eric M. Leeper · Christopher A. Sims · Tao Zha

This 1996 Brookings Papers on Economic Activity paper by Eric Leeper, Christopher Sims, and Tao Zha asks what monetary policy actually does, and argues that the answer the identified-VAR literature …