Housing Price Booms and Crowding-Out Effects in Bank Lending
Year: 2018
Type: article
Abstract: Analyzing the period 1988--2006, we document that banks that are active in strong housing markets increase mortgage lending and decrease commercial lending. Firms that borrow from these banks have significantly lower investment. This is especially pronounced for firms that are more capital constrained or borrow from more-constrained banks. Various extensions and robustness analyses are consistent with the interpretation that commercial loans were crowded out by banks responding to profitable opportunities in mortgage lending, rather than with a demand-based interpretation. The results suggest that housing prices appreciations have negative spillovers to the real economy, which were overlooked thus far.
Source: Review of Financial Studies
DOI: 10.1093/rfs/hhy033
Institutions: University of Miami, University of Pennsylvania, Virginia Tech
Language: English
Subfield: Finance
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W3125789784