Small firms and domestic bank dependence in Europe's great recession

Mathias Hoffmann, Egor Maslov and Bent Sorensen

Journal of International Economics, 2022, vol. 137, issue C

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: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Related works:
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 (2019)
Working Paper: Small Firms and Domestic Bank Dependence in Europe’s Great Recession (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:inecon:v:137:y:2022:i:c:s0022199622000551

DOI: 10.1016/j.jinteco.2022.103623

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