Credit Supply and Productivity Growth

Francesco Manaresi and Nicola Pierri

No 2019/107, IMF Working Papers from International Monetary Fund

Abstract: We study the impact of bank credit on firm productivity. We exploit a matched firm-bank database covering all the credit relationships of Italian corporations, together with a natural experiment, to measure idiosyncratic supply-side shocks to credit availability and to estimate a production model augmented with financial frictions. We find that a contraction in credit supply causes a reduction of firm TFP growth and also harms IT-adoption, innovation, exporting, and adoption of superior management practices, while a credit expansion has limited impact. Quantitatively, the credit contraction between 2007 and 2009 accounts for about a quarter of observed the decline in TFP.

Keywords: WP; supply shock; credit supply; interbank market; capital stock; Productivity; Export; Management; IT adoption; productivity dynamics; firm TFP; credit crunch; borrowing firm; policy function; input acquisition; relation characteristic; firm information; firm balance-sheets; output price; productivity effect; Credit; Supply shocks; Bank credit; Interbank markets (search for similar items in EconPapers)
Pages: 75
Date: 2019-05-17
New Economics Papers: this item is included in nep-ban and nep-fdg
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Citations: View citations in EconPapers (25)

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