The Distribution of Crisis Credit: Effects on Firm Indebtedness and Aggregate Risk

Federico Huneeus, Joseph Kaboski, Mauricio Larrain, Sergio Schmukler and Mario Vera

No 17061, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We study the distribution of credit during crisis times and its impact on firm indebtedness and macroeconomic risk. We analyze a public credit guarantee program in Chile during the COVID-19 pandemic using unique transaction-level data of demand and supply of credit, matched with tax data, for the universe of banks and firms. Credit demand channels loans toward riskier firms, distributing 4.6% of GDP and increasing firm leverage. Despite increased lending to riskier firms at the micro level, macroeconomic risks remain small because of several mitigating factors. We confirm our empirical findings with a model of heterogeneous firms and endogenous default.

Keywords: Bank credit demand; Bank credit supply; Covid-19; Crises; Debt; Firm risk; Macroeconomic risk; Public credit guarantees (search for similar items in EconPapers)
JEL-codes: G21 G28 G32 G33 G38 I18 (search for similar items in EconPapers)
Date: 2022-02
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Related works:
Working Paper: The Distribution of Crisis Credit: Effects on Firm Indebtedness and Aggregate Risk (2022)
Working Paper: The Distribution of Crisis Credit: Effects on Firm Indebtedness and Aggregate Risk (2022)
Working Paper: The Distribution of Crisis Credit: Effects on Firm Indebtedness and Aggregate Risk (2022)
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