Determinants of Aggregate Credit Flows to U.S. Corporate and Noncorporate Sector

Abstract

This article explores the financial accounts of the United States to analyze the synchronicity in bank and nonbank credit flows with the fund flow patterns of U.S. nonfinancial corporate and noncorporate sector. We differ from prior studies and examine the long-term behavior from 1952 to 2015 in relation to peaks and troughs in business cycle, sector-specific factors, and macroeconomic variations. We find that the nonbank credit flows have evolved as a significant source of credit for corporate and noncorporate sector and exhibit higher levels of synchronicity during the period after 1980. The high synchronicity of nonbank credit flows necessitates sufficient resilience in the business cycle upsurge through countercyclical actions, specifically in the noncorporate sector. Multivariate regression results reveal that noncorporate sector relies more on nonbank credit for short-term cash and working capital requirements, whereas corporate sector opts nonbank credit for long-term investments. We also find evidence of relatively higher inter-sectoral impact of business cycle shocks between corporate and noncorporate sector from 1980 to 2015.