Burning Money? Government Lending in a Credit Crunch
Jose-Luis Peydro (),
Rafael Repullo () and
No 13267, CEPR Discussion Papers from C.E.P.R. Discussion Papers
We analyze a small, new credit facility of a Spanish state-owned-bank during the crisis, using its continuous credit scoring system, firm-level scores, and credit register data. Compared to privately-owned banks, the state-owned bank faces worse applicants, softens (tightens) its credit supply to unobserved (observable) riskier firms, and has much higher defaults. In a regression discontinuity design, the supply of public credit causes: large positive real effects to financially-constrained firms (whose relationship banks reduced substantially credit supply); crowding-in of new private-bank credit; and positive spillovers to other firms. Private returns of the credit facility are negative, while social returns are positive.
Keywords: Adverse Selection; credit crunch; credit scoring; crowding-in; Real effects of public credit; state-owned banks (search for similar items in EconPapers)
JEL-codes: E44 G01 G21 G28 (search for similar items in EconPapers)
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Working Paper: Burning money? Government lending in a credit crunch (2018)
Working Paper: Burning Money? Government Lending in a Credit Crunch (2017)
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