Lending Competition and Endogenous Credit Supply:A General Equilibrium Theory of Loan Sales
We develop a general equilibrium theory of loan sales based on bank competition.We show how credit shortage can arise endogenously in response to an increase in bank competition for lending,and how such credit shortage can motivate loan sales as a means to ?nancing risky yet potentially pro?table projects that would otherwise be rationed.Our results highlight an environment in which lower lending standards and sub-prime loans,and higher aggregate risk,can arise endogenously due to an increase in bank competition,without misalignment of incentives,mis-perception of risks,or mis-pricing of assets.Our theory has a number of testable implications,which are all supported by empirical evidence.On a general level,by demonstrating the rudimentary role of lending competition in motivating off-balance-sheet activities,our theory provides a novel account for the fundamental shift,over the past two decades or so,in the lending practice of U.S.and European banks,from the traditional originate to holdmodel of credit provision,towards the originate to distributeapproach for credit extension,or,the emergence of the shadow banking system.
Lending competition Endogenous credit supply Loan sales Directed search General equilibrium Off-balance-sheet activities Shadow banking system
Kevin X.D.Huang Zhe Li Jianfei Sun
Department of Economics Vanderbilt University School of Economics Shanghai University of Finance and Economics Antai College of Economics and Management Shanghai Jiao Tong University
国际会议
2013 China Finance Review International Conference(第六届(2013)中国金融评论国际研讨会)
上海
英文
767-802
2013-07-08（万方平台首次上网日期，不代表论文的发表时间）