Credit Demand versus Supply: Randomized Experimental- and Administrative-Based Evidence

Abstract

We quantify the relative importance of the borrower (demand) vs. the bank (supply) lending channels. We overcome problems in identifying the demand-side due to measurement and endogenous matching between borrowers/banks by exploiting a randomized experiment—posting fictitious mortgage applications to banks through the major Italian online mortgage broker. For applications acceptance, demand and bank channels are similar in R2 (29.4% and 28.5%) and economically (interquartile range increases rejections by 52p.p. and 50p.p., respectively). For loan pricing, demand factors are more important. The estimated supply from the experiment explains actual credit supply to real borrowers by banks on administrative credit-register data.