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On the direct and indirect real effects of credit supply shocks

Laura Alfaro, Manuel García-Santana and Enrique Moral-Benito ()
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Laura Alfaro: Harvard Business School And Nber
Manuel García-Santana: Upf, Barcelona Gse, and Cepr

No 1809, Working Papers from Banco de España, Working Papers Homepage

Abstract: We consider the real effects of bank lending shocks and how they permeate the economy through buyer-supplier linkages. We combine administrative data on all firms in Spain with a matched bank-firm-loan dataset incorporating information on the universe of corporate loans for 2003-2013. Using methods from the matched employer-employee literature for handling large data sets, we identify bank-specific shocks for each year in our sample. Combining the Spanish Input-Output structure and firm-specific measures of upstream and downstream exposure, we construct firm-specific exogenous credit supply shocks and estimate their direct and indirect effects on real activity. Credit supply shocks have sizable direct and downstream propagation effects on investment and output throughout the period but no significant impact on employment during the expansion period. Downstream propagation effects are comparable or even larger in magnitude than direct effects. The results corroborate the importance of network effects in quantifying the real effects of credit shocks and show that real effects vary during booms and busts.

Keywords: bank-lending channel; employment; investment; output; matched employeremployee; input-output linkages (search for similar items in EconPapers)
JEL-codes: E44 G21 L25 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ban, nep-eur, nep-fdg and nep-ure
Date: 2018-03
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https://www.bde.es/f/webbde/SES/Secciones/Publicac ... 18/Files/dt1809e.pdf First version, March 2018 (application/pdf)

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Working Paper: On the Direct and Indirect Real Effects of Credit Supply Shocks (2018) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:bde:wpaper:1809

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