Standard economic theory says that unsecured, high-interest, short-term debt — such as borrowing via credit cards and … bank overdraft facilities — helps individuals smooth consumption in the event of transitory income shocks. This paper shows … income shock of unemployment. Instead, individuals smooth their credit card debt and overdrafts by adjusting consumption. We …

a bank/brokerage-credit-fueled stock-market bubble. The direct effect is a 25 cent increase in a stock's market …Research on leverage and asset-price fluctuations focuses on the direct effect of lax bank lending enabling financially …-constrained investors to take excessive risks. Ignored are unconstrained investors speculating on higher prices during credit booms. To …

A growing literature shows that credit indicators forecast aggregate real outcomes. While researchers have proposed … simple, frictionless, model explains empirical findings commonly attributed to credit cycles. Our key assumption is that … firms have heterogeneous exposures to underlying economy-wide shocks. This leads to endogenous dispersion in credit quality …

This paper develops a network model of interbank lending, in which banks decide to extend credit to their potential … banks refuse to extend credit to one another. We first characterize the terms of the interbank contracts and the patterns of … literature on financial networks, we focus on how anticipation of future defaults may result in ex ante “credit freezes,” whereby …

We develop a new identification strategy to evaluate the impact of the geographic expansion of bank holding company … (BHC) assets across U.S. metropolitan statistical areas (MSAs) on BHC risk. We find that the geographic expansion of bank …

We propose a novel mechanism, “financial dampening,” whereby loan retrenchment by banks attenuates the effectiveness of … monetary policy. The theory unifies an endogenous supply of illiquid local loans and risk-sharing among subsidiaries of bank … exploiting linkages through BHC-internal capital markets across spatially-separate BHC member-banks. We estimate that retrenching …

The market for corporate credit is characterized by significant seasonal variation, both in interest rates and the … volume of new lending. Firms borrowing from banks during seasonal "sales" in late spring and fall issue at 19 basis points … strongly associated with market concentration among a few large banks with repeated interactions …

This paper provides a simple model showing that the extent of competition in credit markets is important in determining … the value of lending relationships. Creditors are more likely to finance credit constrained firms when credit markets are … implications about the availability and the price of credit as firms age in different markets. The paper offers evidence for these …

This study examines the misallocation of credit in Japan associated with the perverse incentives of banks to provide … condition, and these firms continue to perform poorly after receiving additional bank financing. Troubled Japanese banks … additional credit to the weakest firms. Firms are far more likely to receive additional credit if they are in poor financial …

How does the large market for credit score improvement products affect consumers and market efficiency? For consumers …, we use a randomized encouragement design on a standard credit builder loan (CBL) and find null average effects on scores … credit activity. CBLs induce delinquency on pre-existing loan obligations, suggesting that even a seemingly modest additional …