The Leading Role of Bank Supply Shocks

Leonardo Bonilla-Mejía, María Alejandra Ruiz-Sánchez and Mauricio Villamizar-Villegas
Authors registered in the RePEc Author Service: Leonardo Bonilla Mejia

Working papers from Red Investigadores de Economía

Abstract: This paper studies the impact of the Covid-19 pandemic on corporate credit in Colombia. We first exploit the geographic and temporal variation in the disease spread to estimate the effect of local exposure to the virus on credit. Our estimates indicate that neither local exposure to the virus, nor the sector-specific mobility restrictions had an impact on credit. We then assess the role of bank supply shocks. We create a measure of bank exposure, reflecting the geographic heterogeneity in pandemic vulnerability and deposits, and estimate its effect on credit. Results indicate that bank-supply shocks account for a credit contraction of approximately 5.2%. To further disentangle the role of bank supply shock, we control for the interaction between firm and time fixed-effects and restrict the sample to municipalities that were relatively spared from the pandemic, finding similar results. Most of the bank supply effects are driven by firms that are small, young, and have relatively low liquidity.

Keywords: Credit; Covid-19 Pandemic; Bank liquidity (search for similar items in EconPapers)
JEL-codes: G01 G21 (search for similar items in EconPapers)
Pages: 44
Date: 2022-08
New Economics Papers: this item is included in nep-ban and nep-ure
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https://repositorio.banrep.gov.co/bitstream/handle ... 34/10471/be_1205.pdf (application/pdf)

Related works:
Working Paper: The Leading Role of Bank Supply Shock (2023)
Working Paper: The Leading Role of Bank Supply Shocks (2022)
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Persistent link: https://EconPapers.repec.org/RePEc:rie:riecdt:94

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