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Liquidity Risk and the Credit Crunch of 2007–2008: Evidence from Micro-Level Data on Mortgage Loan Applications

Published online by Cambridge University Press:  29 December 2016

Adonis Antoniades
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Abstract

Recent empirical studies have shown that during the financial crisis of 2007–2008, banks that were more heavily exposed to liquidity risk contracted their supply of credit more sharply. I contribute to the identification of this effect by relying on the use of micro-level data on U.S. mortgage loan applications, which allows me to identify liquidity risk as an important determinant of the contraction of credit in the mortgage market but as separate from the precipitous fall in credit demand, disruptions in the securitization and subprime markets, shifts in asset risk, and changing risk aversion among loan officers.

Type
Research Article
Information
Journal of Financial and Quantitative Analysis , Volume 51 , Issue 6 , December 2016 , pp. 1795 - 1822
Copyright
Copyright © Michael G. Foster School of Business, University of Washington 2016 

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