Using data from “The Senior Loan Officer Opinion Survey” of sixty U.S. commercial banks, we investigate whether the level of interest rates influences banks' lending standards for business firms. We find that low levels of both short and long term rates are associated with lower percentage...

We examine the system-wide effects of liquidity regulation on banks’ balance sheets. In the general equilibrium model, banks have to hold liquid assets, and choose among illiquid assets varying in the extent to which they are difficult to value before maturity, e.g., structured securities. By...

This paper develops a theory of the credit cycle to account for recent evidence that capital is increasingly allocated to inefficiently risky projects over the course of the boom. The model features lenders who sell risk exposure to non-lender investors in order to relax borrowing constraints,...

This paper develops a theory of the secondary market trading of financial securitities in which endogenous asset market dynamics generate periods of growing aggregate credit volumes and falling credit standards even in the absence of "financial shocks." Falling credit standards in turn lead to...

This paper examines the relationship between central bank funding and credit risk-taking. Employing comprehensive bank-firm-level data from the German credit registry during 2009:Q1-2014:Q4, we find that borrowing from the central bank is associated with rebalancing of bank portfolios towards...

Using a proprietary micro-dataset on loan defaults in Malaysia, we introduce a simple fixed effects model to extract a measure of bank lending standards from the observed default rates of loan portfolios. We then use this measure to investigate the risk-taking channel of monetary policy in a...