And we are not only seeing this pass-through for larger firms, but also for small- and medium-sized enterprises (SMEs). Remember that at the height of the crisis in 2012, the rates on very small business loans, which are typically given to SMEs, were about 2.5 percentage points higher than those on large loans. Other terms and conditions, such as collateral, were also more demanding.
Economics itself is a ‘cross-cutting’ discipline, and economists are particularly suited to apply their expertise in a range of areas in which a financial institution interacts with its environment. In most risk assessment and asset pricing models, for example, there is the assumption that the law of large numbers prevails.