Small Firms and Domestic Bank Dependence in Europe's Great Recession

Sørensen, Bent E, Mathias Hoffmann and Egor Maslov

No 13691, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: After the inception of the euro, the real economy in most member countries remained dependent on credit by domestic banks, which increasingly funded themselves through cross-border interbank funding. We find that this pattern of `double-decker' banking integration exposed domestic banks to sharp declines in cross-border interbank lending during the eurozone crisis. As a result, domestic banks reduced lending which led to large declines in output in sectors with many small (bank-dependent) firms. We propose a quantitative small open economy model to account for these patterns and conclude that a global banking shock leading to a sudden stop in cross-border interbank lending in the eurozone is required to account for them.

Keywords: Small and medium enterprises; Sme access to finance; Banking integration; Domestic bank dependence; Interbank dependence; International transmission; Eurozone crisis (search for similar items in EconPapers)
JEL-codes: F30 F36 F40 F45 (search for similar items in EconPapers)
Date: 2019-04
New Economics Papers: this item is included in nep-ban, nep-cfn, nep-eec, nep-ent and nep-fdg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Related works:
Journal Article: Small firms and domestic bank dependence in Europe's great recession (2022)
Working Paper: Small firms and domestic bank dependence in Europe’s Great Recession (2021)
Working Paper: Small Firms and Domestic Bank Dependence in Europe's Great Recession (2019)
Working Paper: Small firms and domestic bank dependence in Europe’s great recession (2019)
Working Paper: Small Firms and Domestic Bank Dependence in Europe’s Great Recession (2015)
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