The Real Effects of the Bank Lending Channel

Forthcoming

Authors: Gabriel Jiménez, Atif Mian, José-Luis Peydró and Jesús Saurina

Journal of Monetary Economics

For policy and academia it is crucial to quantify the real effects of the bank lending channel. We analyze the impact of securitization of real estate assets on the supply of credit to non real-estate firms, including risk-taking, and the associated real effects. For identification, we use the credit register of Spain, matched with firm- and bank-level balance-sheet data, and generalize the Khwaja and Mian (2008)’s loan-level estimator to firm-level in order to identify the real aggregate effects of the bank lending channel. The robust results suggest a strong impact on credit supply to non real-estate firms of banks’ ability to securitize real-estate assets. However, this strong loan-level credit channel is neutralized by firm-level equilibrium dynamics in good times. In consequence, we find no real and credit effects at the firm-level. Importantly, securitization implies higher bank risk-taking, both by relaxing lending standards of existing borrowers – cheaper and less collateralized credit with longer maturity – and by a credit expansion on the extensive margin to first-time bank borrowers that substantially default more.

This paper originally appeared as Barcelona GSE Working Paper 1099