Speaker: Yongqin Wang

Topic: Collateral Constraint and China’s Credit Boom in the Global Financial Crisis: Loan-level Anatomy

Abstract: 

Collateral is at the heart of modern financial system and plays an essential role in business cycles and financial cycles. Leveraging detailed loan level data covering a major city in China, the paper first provides stylized facts on bank loan collateral structure. It then shows that facing the tension between heightened uncertainty and government mandate of credit expansion during the GFC, banks significantly raise collateral re- quirements while shortening loan maturity. Pre-existing relationship helps in obtaining bank loans in normal times but has less bite during the GFC. As a further consequence, firms are forced to curb investment in intangible assets, resulting in less firm innova- tion. The anatomy of the collateral dynamics sheds light on how credit gets created and (mis) allocated during the GFC, and provides micro-level evidence for some recent salient macroeconomic facts on China.

Location:  via Zoom; Room 318

Meeting Time: Nov. 23rd, 2022, 21:15pm CST; Nov. 23rd, 2021, 8:15am EST