Burning Money? Government Lending in a Credit Crunch

Gabriel Jimenez, Jose-Luis Peydro, Rafael Repullo and Jesús Saurina

Working Papers from CEMFI

Abstract: We analyze a small, new credit facility of a Spanish state-owned-bank during the crisis, using its continuous credit scoring system, firm-level scores, and credit register data. Compared to privately-owned banks, the state-owned bank faces worse applicants, softens (tightens) its credit supply to unobserved (observable) riskier firms, and has much higher defaults. In a regression discontinuity design, the supply of public credit causes: large positive real effects to financially-constrained firms (whose relationship banks reduced substantially credit supply); crowding-in of new private-bank credit; and positive spillovers to other firms. Private returns of the credit facility are negative, while social returns are positive.

Keywords: Real effects of public credit; credit scoring; credit crunch; crowding-in; adverse selection; state-owned banks. (search for similar items in EconPapers)
JEL-codes: E44 G01 G21 G28 (search for similar items in EconPapers)
Date: 2018-10
New Economics Papers: this item is included in nep-ban and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

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Related works:
Working Paper: Burning money? Government lending in a credit crunch (2019)
Working Paper: Burning Money? Government Lending in a Credit Crunch (2019)
Working Paper: Burning Money? Government Lending in a Credit Crunch (2018)
Working Paper: Burning Money? Government Lending in a Credit Crunch (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:cmf:wpaper:wp2018_1812

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