Listening to Loan Officers: The Impact of Commercial Credit Standards onLending and Output

[...]Because of these concerns, this article examines the value ofthe Senior Loan Officer Opinion Survey in predicting bothlending and output.1 We find that the changes in commercialcredit standards reported by loan officers are indeed linked toaggregate loan growth. Commercial lending by U.S. banksslows substantially following reports of tighter standards, evenafter we control for other factors that might affect growth. Loan officers not only report accurately, they provide us withinformation that we could not infer from other measures ofcredit availability, such as loan rates, loan growth itself, or themix of bank loans and other sources of credit. Changes incredit standards also help to predict economic growth andnarrower measures of business activity such as inventoryinvestment, a notoriously unforecastable variable that is closelytied to the banking sector.[...]