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Search Frictions, Credit Market Liquidity, and Net Interest Margin Cyclicality

Beaubrun-Diant, Kevin; Tripier, Fabien (2015), Search Frictions, Credit Market Liquidity, and Net Interest Margin Cyclicality, Economica, 82, 325, p. 79-102. 10.1111/ecca.12101

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Type
Article accepté pour publication ou publié
Date
2015
Journal name
Economica
Volume
82
Number
325
Publisher
Wiley Blackwell
Pages
79-102
Publication identifier
Metadata
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Author(s)
Beaubrun-Diant, Kevin
Laboratoire d'Economie de Dauphine [LEDa]
Tripier, Fabien
Centre Lillois d’Études et de Recherches Sociologiques et Économiques - UMR 8019 [CLERSÉ]
Centre d'Etudes Prospectives et d'Informations Internationales [CEPII]
Abstract (EN)
The present paper contributes to the body of knowledge on search frictions in credit markets by demonstrating their ability to explain why the net interest margins of banks behave countercyclically. During periods of expansion, a fall in the net interest margin proceeds from two mechanisms: (i) lenders accept that they must finance entrepreneurs that have lower productivity and (ii) the liquidity of the credit market rises, which simplifies access to loans for entrepreneurs and thereby reinforces their threat point when bargaining the interest rate of the loan.
Subjects / Keywords
Search Friction; Matching Model; Nash Bargaining; Bank Interest Margin
JEL
C78 - Bargaining Theory; Matching Theory
E32 - Business Fluctuations; Cycles
E44 - Financial Markets and the Macroeconomy
G21 - Banks; Depository Institutions; Micro Finance Institutions; Mortgages