NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH
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On the Direct and Indirect Real Effects of Credit Supply Shocks

Laura Alfaro, Manuel García-Santana, Enrique Moral-Benito

NBER Working Paper No. 25458
Issued in January 2019
NBER Program(s):Corporate Finance, Economic Fluctuations and Growth

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. We construct firm-specific exogenous credit supply shocks and estimate their direct and indirect effects on real activity using firm-specific measures of upstream and downstream exposure. Credit supply shocks have sizable direct and downstream propagation effects on investment and output throughout the period, especially during the 2008-2009 global financial crisis. In terms of mechanisms, trade credit extended by suppliers and price adjustments play a role in accounting for downstream propagation of financial shocks.

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Document Object Identifier (DOI): 10.3386/w25458

 
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