Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/302201 
Year of Publication: 
2024
Series/Report no.: 
Staff Reports No. 1111
Publisher: 
Federal Reserve Bank of New York, New York, NY
Abstract: 
Using data on balance sheets of both financial and nonfinancial sectors of the economy, we use a "demand system" approach to study how lender composition and willingness to provide credit affect the relationship between credit expansions and real activity. A key advantage of jointly modeling the demand for and supply of credit is the ability to evaluate equilibrium elasticities of credit quantities with respect to variables of interest. We document that the sectoral composition of lenders financing a credit expansion is a key determinant for subsequent real activity and crisis probability. We show that banks and nonbanks respond differentially to changes in macroeconomic conditions, with bank credit more sensitive to economic downturns. Our results thus suggest that secular changes in the structure of the financial sector will affect the dynamics of credit boom-bust cycles.
Subjects: 
intermediated credit
leverage cycles
corporate bonds
JEL: 
G21
G22
G23
G32
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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