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Real Credit Cycles

The financial crisis of 2008 renewed economists’ interest in financial fragility, specifically understanding its origins. This paper shows how market participants’ expectations can be part of standard macroeconomic models and significantly improve their explanatory power.

Loan Types and the Bank Lending Channel

Practitioners commonly refer to four distinct loan types: asset-based loans, cash flow loans, trade financing, and leasing. It is important to account for these differences in loan type in order to analyze the economic significance of credit market disruptions.

Trade Creditors' Information Advantage

Trade credit represents about a quarter of the liabilities of US firms. There are several theories explaining this fact. This study reexamines whether suppliers hold private information about their trade partners, by analyzing their behavior in bankruptcy.

Credit Supply Shocks, Network Effects, and the Real Economy

Using data for Spain between 2003 and 2013, this study examines firms’ responses to credit supply shocks during times of boom (expansion) and bust (financial crisis and recession). Results indicate that propagation of these shocks through the Spanish production network doubles the magnitude of the real effects typically estimated in the literature. This study also shows how such effects vary greatly during booms and busts.

A Model of Credit Market Sentiment

Recent empirical research in finance and economics has revived the idea that investor sentiment drives credit booms and busts. To explore the drivers of sentiment in credit markets, the authors model the two-way feedback between credit market sentiment and credit market outcomes. In their model the propagation of credit cycles is driven by the interplay between expectations and the refinancing nature of credit markets.

Credit-Market Sentiment and the Business Cycle

Using United States data from 1929 to 2013, Jeremy C. Stein and colleagues emphasize the role of credit-market sentiment as an important driver of the business cycle.