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 (4)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0022199622000551
Full text for ScienceDirect subscribers only

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)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:inecon:v:137:y:2022:i:c:s0022199622000551

DOI: 10.1016/j.jinteco.2022.103623

Access Statistics for this article

Journal of International Economics is currently edited by Martin Uribe and Costas Arkolakis

More articles in Journal of International Economics from Elsevier
Bibliographic data for series maintained by Catherine Liu ().