{
  "title": "Aggregate Uncertainty and the Supply of Credit",
  "publication": "IMF Working Papers, December 2, 2013",
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  "summary": "Recent studies show that uncertainty shocks have quantitatively important effects on the real economy. This paper examines one particular channel at work: the supply of credit.",
  "sections": [
    {
      "heading": "Main research question and model",
      "content": "- Examines how uncertainty shocks affect the supply of credit.\n- Presents a model in which a bank, even if managed by risk-neutral shareholders and subject to limited liability, can exhibit self-insurance, leading loan supply to contract when uncertainty increases."
    },
    {
      "heading": "Data, identification, and scope",
      "content": "- Empirical test uses the universe of U.S. commercial banks over the period 1984-2010.\n- Identification of credit supply is achieved by looking at the differential response of banks according to their level of capitalization.\n- Results are reported for the full sample and for subsamples, including separate assessment for large banks."
    },
    {
      "heading": "Key empirical findings",
      "content": "- Increases in uncertainty reduce the supply of credit.\n- The contraction in loan supply is larger for banks with lower levels of capitalization.\n- Results are weaker for large banks.\n- Findings are robust to:\n  - controlling for the lending and capital channels of monetary policy,\n  - using different measures of uncertainty,\n  - breaking the dataset into subsamples.\n- Quantitatively, uncertainty shocks are almost as important as monetary policy ones with regards to the effects on the supply of credit."
    },
    {
      "heading": "Subject areas and keywords",
      "content": "- Subject: Bank credit, Banking, Credit, Economic theory, Financial frictions, Financial institutions, GDP forecasting, Loans, Money, National accounts\n- Keywords: A. bank-borrower loan contract, bank capital, Bank credit, bank default, bank level, capital-to-asset ratio, capitalized bank, Credit, Credit Crunch, Credit Cycles, Financial frictions, GDP forecasting, interest rate, Loans, monetary policy, natural logarithm, Self-insurance, Uncertainty, WP\n\n---\n\n Content in this bundle\n\n- wp13241\n  - wp13241 (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - wp13241 (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\nSource: https://www.imf.org/en/publications/wp/issues/2016/12/31/aggregate-uncertainty-and-the-supply-of-credit-41078"
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    "Authors: Fabian Valencia",
    "Published: December 2, 2013",
    "Series: IMF Working Papers",
    "DOI: https://doi.org/10.5089/9781475513936.001",
    "Examines how uncertainty shocks affect the supply of credit.",
    "Presents a model in which a bank, even if managed by risk-neutral shareholders and subject to limited liability, can exhibit self-insurance, leading loan supply to contract when uncertainty increases.",
    "Empirical test uses the universe of U.S. commercial banks over the period 1984-2010.",
    "Identification of credit supply is achieved by looking at the differential response of banks according to their level of capitalization.",
    "Results are reported for the full sample and for subsamples, including separate assessment for large banks.",
    "Increases in uncertainty reduce the supply of credit.",
    "The contraction in loan supply is larger for banks with lower levels of capitalization.",
    "Results are weaker for large banks.",
    "Findings are robust to:",
    "Quantitatively, uncertainty shocks are almost as important as monetary policy ones with regards to the effects on the supply of credit.",
    "Subject: Bank credit, Banking, Credit, Economic theory, Financial frictions, Financial institutions, GDP forecasting, Loans, Money, National accounts",
    "Keywords: A. bank-borrower loan contract, bank capital, Bank credit, bank default, bank level, capital-to-asset ratio, capitalized bank, Credit, Credit Crunch, Credit Cycles, Financial frictions, GDP forecasting, interest rate, Loans, monetary policy, natural logarithm, Self-insurance, Uncertainty, WP",
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