Events

Professor Rajkamal Iyer
Professor of Financial Economics
Imperial College Business School

We show that commonly used empirical approaches in the banking literature do not recover the impact of credit supply shocks on loan-level lending, on total firm-level borrowing or on real outcomes. Using a simple model of firm borrowing with standard ingredients, we propose new estimators that recover these effects. We apply our methodology to the 2011 credit crisis in Spain and show that it implies significantly smaller effects of loan supply shocks than those generated by current empirical approaches.