Research

This paper documents a systematic cyclical divergence in corporate lending: while new loan originations contract sharply during periods of financial stress, renegotiations expand, buffering firms against stress. Using a new dataset of 100,000 loan-level observations from U.S. SEC filings, I identify the underlying mechanism: financially stronger firms are more likely to originate loans, while weaker firms tend to renegotiate existing loans. This sorting intensifies during the Global Financial Crisis when the distribution of firms shifts toward weaker borrowers, explaining why renegotiation surges precisely when origination collapses. Renegotiation also mitigates the real effects: firms that renegotiate experience significantly smaller declines in profitability than comparable non-renegotiators. These findings provide a new perspective on the conventional view of uniformly procyclical lending and highlight renegotiation as a distinct channel through which credit markets shape the transmission of financial stress.

This paper examines household consumption responses to income shocks using three widely adopted measurement approaches: (i) stated preferences from hypothetical self-reports, (ii) realized self-reports of actual shocks, and (iii) revealed preferences inferred from quasi-experimental variation. Using granular data on Italian households and the 2014 tax bonus as a source of exogenous income variation, this study uncovers substantial differences across methods. Marginal propensities to consume (MPCs) from realized reports are nearly three times higher than hypothetical ones and twice as high as those from revealed preferences. These differences reflect the asymmetric impact of financial frictions: debt suppresses stated spending intentions in hypothetical settings, whereas liquidity constraints amplify realized spending. These results reveal important implications about how households manage uninsurable income risk, as the magnitude of the MPC critically influences the role of incomplete markets in shaping consumption behavior.