Discussion paper

DP12994 Bank Lending in the Knowledge Economy

We study bank portfolio allocations during the transition of the real sector to a knowledge
economy in which firms increasingly use intangible assets. We show that higher corporate
investment in intangible assets slows down banks' commercial lending. Banks reallocate the
resulting lending capacity to other assets, notably mortgages. The findings are consistent with
financial intermediation frictions due to lower collateral value of corporate intangible assets.
Additional tests rule out alternative explanations such as higher mortgage demand. We estimate
that higher corporate intangible assets conservatively explain 25-40% of the decline in bank
commercial lending since the mid-1980s.


Dell'Ariccia, G and L Ratnovski (eds) (2018), “DP12994 Bank Lending in the Knowledge Economy”, CEPR Press Discussion Paper No. 12994. https://cepr.org/publications/dp12994