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Publications
  • March 2021
  • Article
  • Journal of Financial Economics

On the Direct and Indirect Real Effects of Credit Supply Shocks

By: Laura Alfaro, Manuel García-Santana and Enrique Moral-Benito
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Abstract

We explore the real effects of bank-lending shocks and how they permeate the economy through buyer-supplier linkages. We combine administrative data on all Spanish firms with a matched bank-firm-loan dataset of all corporate loans from 2003 to 2013 to estimate firm-specific credit supply shocks for each year. We compute firm-specific measures of exposure to bank lending shocks of customers (upstream propagation) and suppliers (downstream propagation). Our findings suggest that credit supply shocks have sizable direct and downstream propagation effects on employment, investment, and output, especially during the 2008-2009 crisis, but no significant impact on employment during the expansion. We provide evidence that both trade credit extended by suppliers and price adjustments in general equilibrium explain downstream propagation of credit shocks.

Keywords

Credit Supply Shocks; Bank Lending Channel; Input-output Linkages; Output; Mechanisms; Trade Credits; Price Effects; Economics; Credit; System Shocks; Employment; Investment; Spain

Citation

Alfaro, Laura, Manuel García-Santana, and Enrique Moral-Benito. "On the Direct and Indirect Real Effects of Credit Supply Shocks." Journal of Financial Economics 139, no. 3 (March 2021): 895–921.
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About The Author

Laura Alfaro

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More from the Authors
  • Global Supply Chains: The Looming 'Great Reallocation' By: Laura Alfaro and Davin Chor
  • Urgent: The IMF Must Reform By: Laura Alfaro, Guillermo Calvo, José de Gregorio, Augusto de la Torre, Roque Fernandez, Pablo Guidotti, Enrique Mendoza, Ernesto Talvi, Liliana Rojas-Suarez and Andrés Velasco
  • The Real Exchange Rate, Innovation and Productivity By: Laura Alfaro, Alejandro Cuñat, Harald Fadinger and Yanping Liu
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