We document that banks which cut lending more during the Great Recession were lending to riskier firms. To explain this evidence, we build a competitive matching model of bank-firm relationships in wh
We propose a novel mechanism, financial dampening, whereby loan retrenchment by banks attenuates the effectiveness of monetary policy. The theory unifies an endogenous supply of illiquid local loans a
One of the most important puzzles in microfinance is the low rate of borrower graduation to larger, more flexible loans. Utilizing observational and experimental data from a large Chilean microfinance
This paper provides empirical evidence that contractionary monetary policy is less powerful in high interest-rate environments. We argue that this state dependence reflects the interaction between ban
