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Small Firms and Domestic Bank Dependence in Europe's Great Recession

Mathias Hoffmann, Egor Maslov and Bent Sorensen

No 7897, CESifo Working Paper Series from CESifo Group Munich

Abstract: Small businesses (SMEs) depend on banks for credit. We show that the severity of the Eurozone crisis was worse in countries where firms borrowed more from domestic banks (“domestic bank dependence”) than in countries where firms borrowed more from international banks. Eurozone banking integration in the years 2000–2008 mainly involved cross-border lending between banks while foreign banks’ lending to the real sector stayed flat. Hence, SMEs remained dependent on domestic banks and were vulnerable to global banking shocks. We confirm, using a calibrated quantitative model, that domestic bank dependence makes sectors and countries with many SMEs vulnerable to global banking shocks.

Keywords: small and medium enterprises; SME access to finance; banking integration; domestic bank dependence; international transmission; Eurozone crisis (search for similar items in EconPapers)
JEL-codes: F30 F36 F40 F45 (search for similar items in EconPapers)
Date: 2019
New Economics Papers: this item is included in nep-ban, nep-eec, nep-ent and nep-fdg
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Related works:
Working Paper: Small Firms and Domestic Bank Dependence in Europe's Great Recession (2019) Downloads
Working Paper: Small firms and domestic bank dependence in Europe’s great recession (2019) Downloads
Working Paper: Small Firms and Domestic Bank Dependence in Europe’s Great Recession (2015) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_7897

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