In order to stimulate or subdue the economy, banking regulators have sought to impose caps or floors on individual bank’s lending to certain types of borrowers. This paper shows that the resultant decision problem for a bank of which potential borrower to accept is a variant of the marriage/secretary problem where one can accept several applicants. The paper solves the decision problem using dy...

Despite widespread belief that redlining contributed to disinvestment in cities, there has been little empirical analysis of historical lending patterns. The lack of appropriate data and clear definitions of redlining has contributed to this void. This article reviews definitions and methods that have emerged from research on lending in recent years and considers how they can be applied to rese...

This paper examines the asymmetric effects of monetary policy on output and the role of bank-lending behavior. We investigate whether contractionary and expansionary policies have asymmetric impacts on bank loans, and whether there are further differences in the response of small banks and big banks to policy actions. We also investigate the link between changes in bank lending and aggregate ec...

Article history: Received 13 October 2011 Accepted 26 December 2011 Available online 3 January 2012 This paper examines the determinants of the signaling effect of acquiring lines of credit (LCs) on borrower stock returns by testing the economic conditions and lending competitionhypotheses. The economic conditions hypothesis is tested by examining the loan cyclicality and handpicking effects. T...

The literature on microfinance has largely attributed the industry’s success to joint liability and peer monitoring, which are direct results of the group lending methodology. As individual lending has become more common in microfinance, especially in Latin America, we need to revisit the reasons for these successes. This paper uses a dynamic model with endogenously determined repayment incenti...

While bank lending may fall in response to shocks to their liquidity, to what extent are such shocks transmitted to borrowing …rms? Tracing such transmission mechanisms has proven di¢ cult in the past due to a lack of micro data linking banks to borrowing …rms and identi…cation concerns. This paper uses di¤erential liquidity shocks arising from unanticipated nuclear tests in Pakistan in 1998, a...

*The views expressed here are those of the author and do not necessarily represent the views of the Federal Reserve Bank of Philadelphia or the Federal Reserve System. 1 Most observers view the expansion of high-risk mortgage loans between 2004 and 2006 as a particularly dramatic example of a widespread decline in lending standards. While the research on this episode is expanding rapidly, the e...

T he lending activity of commercial banks has long received considerable attention as an important contributor to the performance of the economy. This attention has, perhaps, become sharper in the wake of the difficulties experienced by the banking industry in the 1980s. In recent years, the public perception of bank lending seems to have swung through a cycle. In the early 1990s, the prevailin...

The systematic risk of US commercial bank stocks more than doubled from 2000 to 2006, primarily due to their increased residential mortgage exposure. Higher levels of mortgage lending produced better earnings but relatively lower stock returns. Banks engaged heavily in mortgage lending encountered less enthusiastic market response to their earnings announcements, suggesting that financial marke...