Relationship Networks in Banking Around a Sovereign Default and Currency Crisis

Pablo D’Erasmo (), Hernan Moscoso Boedo, María Pía Olivero and Máximo Sangiácomo
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Pablo D’Erasmo: Federal Reserve Bank of Philadelphia
María Pía Olivero: Drexel University
Máximo Sangiácomo: Central Bank of Argentina
Authors registered in the RePEc Author Service: Pablo N. D'Erasmo

IMF Economic Review, 2020, vol. 68, issue 3, No 5, 584-642

Abstract: Abstract We study how banks’ exposure to a sovereign crisis gets transmitted onto the corporate sector. To do so, we use data on the universe of banks and firms in Argentina during the crisis of 2001. We build a model characterized by matching frictions in which firms establish (long-term) relationships with banks that are subject to balance sheet disruptions. Credit relationships with banks more exposed to the crisis suffer the most. However, this relationship-level effect overstates the true cost of the crisis since profitable firms (e.g., exporters after a devaluation) might find it optimal to switch lenders, reducing the negative impact on overall credit and activity. Using linked bank-firm and firm-level data, we find evidence largely consistent with our theory.

Keywords: E32; G21; H63; N26 (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (3)

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Working Paper: Relationship Networks in Banking Around a Sovereign Default and Currency Crisis (2019)
Working Paper: Relationship Networks in Banking Around a Sovereign Default and Currency Crisis (2019)
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DOI: 10.1057/s41308-020-00114-4

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