Interbank Liquidity Crunch and the Firm Credit Crunch: Evidence from the 2007-2009 Crisis
We study the credit supply effects of the unexpected freeze of the European interbank market, using exhaustive Portuguese loan-level data. We find that banks that rely more on interbank borrowing before the crisis decrease their credit supply more during the crisis. The credit supply reduction is st...
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| Format: | Article |
| Language: | en_US |
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Oxford University Press on behalf of The Society for Financial Studies
2014
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| Online Access: | http://hdl.handle.net/1721.1/87735 https://orcid.org/0000-0002-3193-0441 https://orcid.org/0000-0002-3658-9131 |
| _version_ | 1826189797161435136 |
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| author | Iyer, Rajkamal Peydro, Jose-Luis da-Rocha-Lopes, Samuel Schoar, Antoinette |
| author2 | Sloan School of Management |
| author_facet | Sloan School of Management Iyer, Rajkamal Peydro, Jose-Luis da-Rocha-Lopes, Samuel Schoar, Antoinette |
| author_sort | Iyer, Rajkamal |
| collection | MIT |
| description | We study the credit supply effects of the unexpected freeze of the European interbank market, using exhaustive Portuguese loan-level data. We find that banks that rely more on interbank borrowing before the crisis decrease their credit supply more during the crisis. The credit supply reduction is stronger for firms that are smaller, with weaker banking relationships. Small firms cannot compensate the credit crunch with other sources of debt. Furthermore, the impact of illiquidity on the credit crunch is stronger for less solvent banks. Finally, we find no overall positive effects of central bank liquidity but instead higher hoarding of liquidity. |
| first_indexed | 2024-09-23T08:22:21Z |
| format | Article |
| id | mit-1721.1/87735 |
| institution | Massachusetts Institute of Technology |
| language | en_US |
| last_indexed | 2024-09-23T08:22:21Z |
| publishDate | 2014 |
| publisher | Oxford University Press on behalf of The Society for Financial Studies |
| record_format | dspace |
| spelling | mit-1721.1/877352022-09-30T09:11:23Z Interbank Liquidity Crunch and the Firm Credit Crunch: Evidence from the 2007-2009 Crisis Iyer, Rajkamal Peydro, Jose-Luis da-Rocha-Lopes, Samuel Schoar, Antoinette Sloan School of Management Iyer, Rajkamal Schoar, Antoinette We study the credit supply effects of the unexpected freeze of the European interbank market, using exhaustive Portuguese loan-level data. We find that banks that rely more on interbank borrowing before the crisis decrease their credit supply more during the crisis. The credit supply reduction is stronger for firms that are smaller, with weaker banking relationships. Small firms cannot compensate the credit crunch with other sources of debt. Furthermore, the impact of illiquidity on the credit crunch is stronger for less solvent banks. Finally, we find no overall positive effects of central bank liquidity but instead higher hoarding of liquidity. Spain. Ministerio de Economía y Competitividad (Project ECO2012-32434) Spain. Ministerio de Economía y Competitividad (Severo Ochoa Programme for Centres of Excellence in R&D (SEV-2011-0075)) 2014-06-11T16:24:15Z 2014-06-11T16:24:15Z 2013-10 2013-04 Article http://purl.org/eprint/type/JournalArticle 0893-9454 1465-7368 http://hdl.handle.net/1721.1/87735 Iyer, R., J.-L. Peydro, S. da-Rocha-Lopes, and A. Schoar. “Interbank Liquidity Crunch and the Firm Credit Crunch: Evidence from the 2007-2009 Crisis.” Review of Financial Studies 27, no. 1 (January 1, 2014): 347–372. https://orcid.org/0000-0002-3193-0441 https://orcid.org/0000-0002-3658-9131 en_US http://dx.doi.org/10.1093/rfs/hht056 Review of Financial Studies Creative Commons Attribution-Noncommercial-Share Alike http://creativecommons.org/licenses/by-nc-sa/4.0/ application/pdf Oxford University Press on behalf of The Society for Financial Studies SSRN |
| spellingShingle | Iyer, Rajkamal Peydro, Jose-Luis da-Rocha-Lopes, Samuel Schoar, Antoinette Interbank Liquidity Crunch and the Firm Credit Crunch: Evidence from the 2007-2009 Crisis |
| title | Interbank Liquidity Crunch and the Firm Credit Crunch: Evidence from the 2007-2009 Crisis |
| title_full | Interbank Liquidity Crunch and the Firm Credit Crunch: Evidence from the 2007-2009 Crisis |
| title_fullStr | Interbank Liquidity Crunch and the Firm Credit Crunch: Evidence from the 2007-2009 Crisis |
| title_full_unstemmed | Interbank Liquidity Crunch and the Firm Credit Crunch: Evidence from the 2007-2009 Crisis |
| title_short | Interbank Liquidity Crunch and the Firm Credit Crunch: Evidence from the 2007-2009 Crisis |
| title_sort | interbank liquidity crunch and the firm credit crunch evidence from the 2007 2009 crisis |
| url | http://hdl.handle.net/1721.1/87735 https://orcid.org/0000-0002-3193-0441 https://orcid.org/0000-0002-3658-9131 |
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