Anmerkungen:
Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments February 3, 2023 erstellt
Beschreibung:
This paper shows that the impact of credit supply on economic activity is conditioned by banks' equity distribution. Using a myriad of publicly available data on bank's balance sheet, and mortgage and business lending from the United States, we offer novel empirical evidence on how changes in the level of bank equity affects the impact of credit supply on economic activity. Our results show that areas exposed to lenders with high level of bank equity experience high levels of economic growth and employment. We also construct a quantitative model that rationalises this empirical evidence by showing how aggregate lending is influenced by banks’ equity distribution. Our model shows that the higher the bank equity exposure of an area is, the more credit supply is provided to the area. While the model shows that banks' equity distribution matters for understanding the impact of mortgage credit on economic performance, it does not have the same explanatory power to explain the impact of business credit on economic growth, which may be more influenced by risk-return trade-off decisions