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On the Direct and Indirect Real Effects of Credit Supply Shocks

Laura Alfaro (), Manuel Garcia-Santana () and Enrique Moral-Benito ()

No 12794, CEPR Discussion Papers from C.E.P.R. Discussion Papers

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 on the universe of corporate loans for 2003-2013 to identify bank-specific shocks for each year using methods from the matched employer-employee literature. Combining 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 contractions.

Keywords: Bank-Lending Channel; employment; input-output linkages; investment; matched employer-employee; output (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ban and nep-fdg
Date: 2018-03
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Working Paper: On the Direct and Indirect Real Effects of Credit Supply Shocks (2019) Downloads
Working Paper: On the direct and indirect real effects of credit supply shocks (2018) Downloads
Working Paper: On the Direct and Indirect Real Effects of Credit Supply Shocks (2018) Downloads
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