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Banks' Funding Stress, Lending Supply, and Consumption Expenditure

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We employ a unique identification strategy linking survey data on household consumption expenditure to bank-level data to estimate the effects of bank funding stress on consumer credit and consumption expenditures.… Click to show full abstract

We employ a unique identification strategy linking survey data on household consumption expenditure to bank-level data to estimate the effects of bank funding stress on consumer credit and consumption expenditures. We show that households whose banks were more exposed to funding shocks report lower levels of nonmortgage liabilities. This, however, only translates into lower levels of consumption for low income households. Hence, adverse credit supply shocks are associated with significant heterogeneous effects.

Keywords: funding stress; supply; consumption; consumption expenditure; banks funding

Journal Title: Journal of Money, Credit and Banking
Year Published: 2020

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