We explore empirically how the time-varying allocation of credit across firms with heterogeneous credit quality matters … credit allocation, captured by Greenwood and Hanson (2013)'s ISS indicator, helps predict downside risks to GDP growth and … systemic banking crises, two to three years ahead. Our analysis indicates that the riskiness of credit allocation is both a …

This paper studies episodes in which aggregate bank credit contracts alongside expanding economic activity-credit …--on average, they occur every five years. By comparison, banking crises take place every eight years on average. Credit reversals …

Credit spreads rise after a monetary policy tightening, yet spread reactions are heterogeneous across firms. Exploiting … with high leverage experience a more pronounced increase in credit spreads than firms with low leverage. A large fraction … of this increase is due to a component of credit spreads that is in excess of firms' expected default. Our results …

Adequate loan classification practices are an essential part of a sound and effective credit risk-management process in … a bank. Failure to identify deterioration in credit quality in a timely manner can aggravate and prolong the problem …