Effects of Capital-Asset Constraints on Commercial Bank Lending
نویسندگان
چکیده
The U.S. experienced a sharp decline in commercial bank lending from 1990 to 1992. This particular event has caught the attention of many scholars because it is often blamed as one of the factors that led to a failure of a speedy recovery from the ongoing recession. This issue remains controversial because debate exists on whether the credit decline was due to a reduction in supply or to a reduction in demand. Both categories are investigated in this paper by dealing with potential causes ranging from recessionary effects to capital-asset constraints. The analytical component focuses on involves single and multiple regressions employing data sets from aggregate state-by-state totals and individual banks in California. The results from the analysis suggest that low capitalasset levels and strict regulatory standards during 1990 resulted in a supply-induced credit decline.
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