The behavior of consumer loan rates during the 1990 credit slowdown |
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Authors: | Cara Lown Stavros Peristiani |
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Institution: | Main 922, Federal Reserve Bank of New York, 33 Liberty Street, New York, NY 10045, USA |
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Abstract: | This study re-examines the 1990 credit slowdown by investigating the loan pricing behavior of commercial banks. We find strong evidence that large, undercapitalized banks contributed to the credit slowdown by charging consumers a higher-than-average loan rate relative to better-capitalized institutions. This disparity in lending exists even after accounting for bank funding costs. Thus, we argue that there was a lending slowdown that occurred among large, undercapitalized banks. The reluctance to lend among undercapitalized banks is at least suggestive of behavior that is consistent with a credit crunch. |
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Keywords: | JEL classification: G21 G28 |
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