On Specialists and Generalists: Loan Relationships, Systemic Risk, and Monetary Policy Transmission

Description

Credit relationships lie at the heart of banking theory, corporate finance theory, and the transmission of monetary policy. In this project we empirically investigate the lending relationships between German banks and firms. Using a detailed dataset from the Deutsche Bundesbank, we aggregate banks’ loan exposures to firms at the sectoral level and test existing theories on the expected behavior of banks and firms. We show that the structure of the observed lending relationships can only partly be explained based on portfolio theoretic approaches. We also highlight the policy implications arising from the observed network structures. 

Project Leader / Primary Investigator

Daniel Fricke with Ben Craig and Tarik Roukny

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