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The Disparate Outcomes of Bank‑ and Nonbank‑Financed Private Credit Expansions

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Abstract

Long-run trends in increased access to credit are thought to improve real activity. However, “rapid” credit expansions do not always end well and have been shown in the academic literature to predict adverse real outcomes such as lower GDP growth and an increased likelihood of crises. Given these financial stability considerations associated with rapid credit expansions, being able to distinguish in real time “good booms” from “bad booms” is of crucial interest for policymakers. While the recent literature has focused on understanding how the composition of borrowers helps distinguish good and bad booms, in this post we investigate how the composition of lending during a credit expansion matters for subsequent real outcomes.

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  • Nina Boyarchenko & Leonardo Elias, 2024. "The Disparate Outcomes of Bank‑ and Nonbank‑Financed Private Credit Expansions," Liberty Street Economics 20240820, Federal Reserve Bank of New York.
    • Handle: RePEc:fip:fednls:98695
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    File URL: https://libertystreeteconomics.newyorkfed.org/2024/08/the-disparate-outcomes-of-bank-and-nonbank-financed-private-credit-expansions/
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    More about this item

    Keywords

    intermediated credit; credit expansion; predictable financial crises;
    All these keywords.

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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