We document that banks reduce the supply of mortgage loans when policy uncertainty increases in their headquarter states as measured by timing U.S. gubernatorial elections. The reduction is larger for term-limited elections and close utilize high-frequency, geographically granular loan-level data to address an identification problem arising from changing local loan demand: (i) we estimate a dif...

We propose a theory of credit lines provided by banks to firms as a form of monitored liquidity insurance. Bank monitoring and resulting revocations help control illiquidityseeking behavior of firms insured by credit lines. The cost of credit lines is thus greater for firms with high liquidity risk, which in turn are likely to use cash instead of credit lines. We test this implication for corpo...

Credit Stagnation in Latin America Adolfo Barajas, IMF Institute Roberto Steiner, Universidad de los Andes, Bogotá, Colombia This study examines a troubling phenomenon occurring in several Latin American economies in the last few years: a marked slowdown in bank credit to the private sector. Since the late 1980s, the “credit channel” literature has made a case that fluctuations in bank credit m...

Studies have shown that when two information providers or outside auditors exist, the value provided by the second one will be decreased by the actions of the first. Capitalizing on the highly similar functions performed by banks and rating agencies, this paper examines the informational value of the credit ratings of bank loans. Further, it provides evidence on whether rating agencies duplicat...