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November 1982

The Puzzling Behavior of Business Loans in the Current Recession


​This article investigates whether the total funds raised by nonfinancial business firms have increased at an unusually rapid rate during this recession. The evidence presented does not support these explanations for the growth in bank loans to business firms. The aspect of business finance that is unusual in the current recession is not the amount of total funds raised, but the relatively large share of funds raised from short-term sources, including bank loans, and the small share from long-term sources.