25 Years IWH

Veranstaltung
23
Oct 2017

14:15 - 15:45

Bad Times, Good Credit

Banks’ limited knowledge about borrowers’ creditworthiness constitutes an important friction in credit markets. Is this friction deeper in recessions, thereby contributing to cyclical swings in credit?

Speaker
Professor Kasper Roszbach, PhD , Sveriges Riksbank
Location
IWH, conference room
Professor Kasper Roszbach, PhD

Über den Autor

Professor Kasper Roszbach, PhD

Kasper Roszbach obtained his Ph.D. in economics from the Stockholm School of Economics in 1998. He started as a research economist at the De Nederlandsche Bank, the central bank of the Netherlands. He also worked at ABN Amro Bank and as a senior economist and deputy director of merger control at the Netherlands Competition Authority.

Banks’ limited knowledge about borrowers’ creditworthiness constitutes an important friction in credit markets. Is this friction deeper in recessions, thereby contributing to cyclical swings in credit? Alternatively, is the depth of this friction reduced in recessions, as tough times reveal information about firm quality? We test these alternative hypotheses using internal ratings data from a large, Swedish bank. This banks’ ability to sort borrowers by credit quality is best in recessions, and worst in good times. Our results suggest that information frictions are counter-cyclical in corporate credit markets.

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