Economic and financial debates no. 16: Banks' supply of long term credit after a liquidity shock : Evidence from 2007 2009
We study the real effect on banks’ credit supply after a negative liquidity shock. Controlling for demand effects, we take advantage of the exogenous international interbank market freeze in 2007-2008 to assess the causal relation between French banks’ liquidity risk and their lending. We find that banks with a lower funding risk and a lower ratio of long-term loans to long-term funding and deposits provide more loans after the shock. The difference in lending between banks only exists for long-term loan supply. Small firms bear the decline in longterm lending.
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- Published on 02/07/2015
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Updated on: 03/19/2019 15:48