Supply and Demand Identification in the Credit Market

This paper identifies supply and demand functions in the Chilean credit market. The analysis divides credit into three categories by debtor type, namely consumption, commercial and housing loans. We successfully exploit novel bank-level data on non-price covenants to address the simultaneous equatio...

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Bibliographic Details
Published inIDEAS Working Paper Series from RePEc
Main Authors Mauricio Calani C, Pablo García S, Daniel, Oda Z
Format Paper
LanguageEnglish
Published St. Louis Federal Reserve Bank of St. Louis 01.01.2010
Subjects
Supply & demand
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Summary:This paper identifies supply and demand functions in the Chilean credit market. The analysis divides credit into three categories by debtor type, namely consumption, commercial and housing loans. We successfully exploit novel bank-level data on non-price covenants to address the simultaneous equation endogeneity problem in the estimation of interest rate elasticities. Our truly unique panel data set covers the 2003-2009 period and combines information on loan amount allocation, interest rates, balance sheet indicators with information from the "Survey on General Conditions and Standards in the Credit Market", conducted by the Central Bank of Chile since 2003. Additionally, we characterize the statistical determinants of the survey responses, and later we use our estimation results for understanding the credit contraction episode of the second half of 2008, during the global financial turmoil.