The Leading Role of Bank Supply Shocks

Leonardo Bonilla-Mejía and Mauricio Villamizar-Villegas
Authors registered in the RePEc Author Service: Leonardo Bonilla Mejia

Borradores de Economia from Banco de la Republica de Colombia

Abstract: This paper studies the impact of the Covid-19 pandemic on corporate credit in Colombia. We first exploit the geographic and temporal variation in the disease spread to estimate the effect of local exposure to the virus on credit. Our estimates indicate that neither local exposure to the virus, nor the sector-specific mobility restrictions had an impact on credit. We then assess the role of bank supply shocks. We create a measure of bank exposure, reflecting the geographic heterogeneity in pandemic vulnerability and deposits, and estimate its effect on credit. Results indicate that bank-supply shocks account for a credit contraction of approximately 5.2%. To further disentangle the role of bank supply shock, we control for the interaction between firm and time fixed-effects and restrict the sample to municipalities that were relatively spared from the pandemic, finding similar results. Most of the bank supply effects are driven by firms that are small, young, and have relatively low liquidity. **** RESUMEN: Este artículo estudia el impacto de la pandemia del Covid-19 en el crédito empresarial en Colombia. Primero, utilizamos la variación geográfica y temporal en la propagación de la enfermedad para estimar el efecto de la exposición local al virus sobre el crédito. Las estimaciones indican que ni la dinámica local de la enfermedad ni las restricciones de movilidad sectoriales tuvieron efectos importantes sobre el crédito. En seguida evaluamos el papel de los choques de oferta bancaria. Creamos una medida de exposición bancaria, basada en la distribución geográfica de la vulnerabilidad a la pandemia y los depósitos, y estimamos su efecto sobre el crédito. Los resultados indican que los choques de oferta bancaria redujeron el crédito en aproximadamente 5.2%. Para identificar plenamente el rol del choque de oferta bancaria, se incluyen en el modelo las interacciones entre los efectos fijos de firma y tiempo y se restringe la muestra a municipios que no fueron tan severamente afectados por la pandemia, encontrando resultados similares. La mayoría de los efectos se explican por firmas peque˜nas, j´ovenes y con relativamente baja liquidez.

Keywords: Credit; Covid-19 Pandemic; bank liquidity; crédito; pandemia de Covid-19; liquidez de bancos (search for similar items in EconPapers)
JEL-codes: G01 G21 (search for similar items in EconPapers)
Pages: 42
Date: 2022-08
New Economics Papers: this item is included in nep-ban
References: View references in EconPapers View complete reference list from CitEc
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https://doi.org/10.32468/be.1205

Related works:
Working Paper: The Leading Role of Bank Supply Shock (2023)
Working Paper: The Leading Role of Bank Supply Shocks (2022)
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Persistent link: https://EconPapers.repec.org/RePEc:bdr:borrec:1205

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