BIS Working Papers are written by members of the Monetary and Economic Department of the Bank for International Settlements, and from time to time by other economists, and are published by the Bank. The papers are on subjects of topical interest and are technical in character. The views expressed in them are those of their authors and not necessarily the views of the BIS.

We provide evidence that a weak banking sector has contributed to low productivity growth following the European sovereign debt crisis. An unexpected increase in capital requirements for a subset of Portuguese banks in 2011 provides a natural experiment to study the eects of reduced bank capital adequacy on productivity. Aected banks respond not only by cutting back on lending but also by reallocating credit to rms in nancial distress with prior underreported loan loss provisioning. We develop a method to detect when banks delay loss reporting using detailed loan-level data. We then show that the credit reallocation leads to a reallocation of production factors across rms. A partial equilibrium exercise suggests that the resulting increase in factor misallocation accounts for 20% of the decline in productivity in Portugal in 2012.

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. www.econstor.eu THE BANK LENDING CHANNEL THE BANK LENDING CHANNEL THE BANK LENDING CHANNEL THE BANK LENDING CHANNEL THE BANK LENDING CHANNEL OF MONET OF MONET OF MONET OF MONET OF MONETAR AR AR AR ARY POLICY Y POLICY Y POLICY Y POLICY Y POLICY: : : : : IDENTIFIC IDENTIFIC IDENTIFIC IDENTIFIC IDENTIFICA A A A ATION TION TION TION TION AND ESTIMA AND ESTIMA AND ESTIMA AND ESTIMA AND ESTIMATION TION TION TION TION USING POR USING POR USING POR USING POR USING PORTUGUESE MICR TUGUESE MICR TUGUESE MICR TUGUESE MICR TUGUESE MICRO The papers presented at the conference examine the euro area monetary transmission process using different data and methodologies: structural and VAR macro-models for the euro area and the national economies, panel micro data analyses of the investment behaviour of non-financial firms and panel micro data analyses of the behaviour of commercial banks. Terms of use: Documents in EconStor may E U R O P E A N C E N T R A L B A N K W O R K I N G PA P E R S E R I E SEditorial support on all papers was provided by Briony Rose and Susana Sommaggio. The importance of the credit channel depends on the extent to which banks rely on deposit financing and adjust their loan supply schedules following changes in bank reserves (for a given bank-dependency of the borrowers). The aim of this paper is just to show that bank loan supply depends on bank deposits and thus, monetary policy by affecting bank deposits is also able to shift loan bank supply schedules.At the empirical level, the bulk of the most relevant literature has tried to uncover the lending channel through the estimation of a reduced form equation for the bank credit market, with variables in first differences (i.e., stationarised variables). This paper adds to this area of research, but departs from previous studies on several aspects. In particular it is argued that the reduced form approach requires strong identifying restrictions and that it does not allow estimating the relevant parameters. As an alternative we suggest a "structural approach" which amounts to directly estimate bank loan-supply schedules, with variables in levels. For that purpose we resort to very recent panel data cointegration techniques.The main conclusion of the paper is that there is a banking lending channel in the transmission of monetary policy in the Portuguese economy and that the importance of this channel is larger for the less capitalised banks. Size and liquidity do...

Available online xxxx JEL classification: C31 E44 E51 G21 a b s t r a c tThis study examines the importance of credit demand and credit supply-related factors in explaining the evolution of credit granted to Portuguese SMEs. The results suggest that the interest rate is a strong driver of SMEs' demand for bank loans, as well as their internal financing capacity. On the other hand, credit supply mostly depends on the firms' ability to generate cash-flows and reimburse their debt, and on the amount of collateral. The model was estimated for the period between 2010 and 2012. The results suggest that a considerable fraction of Portuguese SMEs were affected by credit rationing in this period.

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