Informational Frictions and the Credit Crunch
Corresponding Author
OLIVIER DARMOUNI
Olivier Darmouni is with Columbia University. I am indebted to David Sraer, Jakub Kastl, Markus Brunnermeier, Motohiro Yogo, and Valentin Haddad for their continuous support. I would also like to thank Tobias Berg; Charles Calomiris; Adrien Matray; Atif Mian; Justin Murfin; Hoai-Luu Nguyen; Tomek Piskorski; Matthew Plosser; multiple reviewers; and seminar participants at Princeton University, Columbia, Harvard Business School, UT Austin, NYU Stern, Yale SOM, Wharton, Berkeley Haas, FDIC, HEC Paris, the Toulouse School of Economics, Wharton, Kellogg, the New York Fed, WFA, Copenhagen Business School, BYU, and UCLA Anderson for many discussions and comments that improved this paper. Special thanks to Gabriel Chodorow-Reich for his help and support at the early stages of this project. Previous versions of this paper were entitled “The Effects of Informational Frictions on Credit Reallocation” and “Estimating Informational Frictions in Sticky Relationships.” Lira Mota provided outstanding research assistance. I declare that I have no relevant or material financial interests that relate to the research described in this paper.
Correspondence: Olivier Darmouni, Assistant Professor, Columbia Business School, 3022 Broadway, New York, NY 10027; e-mail: o.darmouni@gmail.com.
Search for more papers by this authorCorresponding Author
OLIVIER DARMOUNI
Olivier Darmouni is with Columbia University. I am indebted to David Sraer, Jakub Kastl, Markus Brunnermeier, Motohiro Yogo, and Valentin Haddad for their continuous support. I would also like to thank Tobias Berg; Charles Calomiris; Adrien Matray; Atif Mian; Justin Murfin; Hoai-Luu Nguyen; Tomek Piskorski; Matthew Plosser; multiple reviewers; and seminar participants at Princeton University, Columbia, Harvard Business School, UT Austin, NYU Stern, Yale SOM, Wharton, Berkeley Haas, FDIC, HEC Paris, the Toulouse School of Economics, Wharton, Kellogg, the New York Fed, WFA, Copenhagen Business School, BYU, and UCLA Anderson for many discussions and comments that improved this paper. Special thanks to Gabriel Chodorow-Reich for his help and support at the early stages of this project. Previous versions of this paper were entitled “The Effects of Informational Frictions on Credit Reallocation” and “Estimating Informational Frictions in Sticky Relationships.” Lira Mota provided outstanding research assistance. I declare that I have no relevant or material financial interests that relate to the research described in this paper.
Correspondence: Olivier Darmouni, Assistant Professor, Columbia Business School, 3022 Broadway, New York, NY 10027; e-mail: o.darmouni@gmail.com.
Search for more papers by this authorABSTRACT
In this paper, I estimate the magnitude of an informational friction limiting credit reallocation to firms during the 2007 to 2009 financial crisis. Because lenders rely on private information when deciding which relationship to end, borrowers looking for a new lender are adversely selected. I show how to separately identify private information from information common to all lenders but unobservable to the econometrician by using bank shocks within a discrete choice model of relationships. Quantitatively, these informational frictions appear to be too small to explain the credit crunch in the U.S. syndicated corporate loan market.
Supporting Information
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Appendix S1: Internet Appendix. |
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Replication code. |
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