Uncertainty constrains credit supply, IMF paper finds
A working paper published today by the International Monetary Fund examines the effect of economic uncertainty on the supply of credit – using a model to show that self-insurance on the part of banks can cause loan supply to contract when uncertainty increases.
In the paper, Aggregate uncertainty and the supply of credit, author Fabian Valencia tests his thesis with the universe of US commercial banks over the period 1984–2010. Identification of credit supply is achieved by looking at the
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