Housing price booms and crowding-out effects in bank lending

Indraneel Chakraborty, Itay Goldstein, Andrew MacKinlay

Research output: Contribution to journalArticlepeer-review

37 Scopus citations


Analyzing the period 1988-2006, we document that banks that are active in strong housing markets increase mortgage lending and decrease commercial lending. Firms that borrow from these banks have significantly lower investment. This is especially pronounced for firms that are more capital constrained or borrow from more-constrained banks. Various extensions and robustness analyses are consistent with the interpretation that commercial loans were crowded out by banks responding to profitable opportunities in mortgage lending, rather than with a demand-based interpretation. The results suggest that housing prices appreciations have negative spillovers to the real economy, which were overlooked thus far.

Original languageEnglish (US)
Pages (from-to)2806-2853
Number of pages48
JournalReview of Financial Studies
Issue number7
StatePublished - Jul 1 2018

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics


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