On the Direct and Indirect Real Effects of Credit Supply Shocks

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

doi:10.3386/w25458

Cited by 66 publications

(25 citation statements)

References 28 publications

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“…AW, DJJMS), other recent studies find real effects mostly in times of crisis (e.g. Greenstone, Mas, and Nguyen, 2020;Gilchrist, Siemer, and Zakrajsek, 2018;Alfaro et al, 2021). 20 The latter finding seems in line with the results of Jiménez, Mian, Peydró, and Saurina (2020), who show that credit supply booms (as opposed to credit supply contractions) have little bearing on firm level outcomes.…”

Section: The Role Of the Crisissupporting

confidence: 63%

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Markups and Financial Shocks

Meinen

Soares

2021

SSRN Journal

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Research QuestionRecent research shows that firm heterogeneity plays a crucial role in understanding the dynamics of aggregate market power. Several factors may influence markup adjustments at the firm level in different ways. In this paper, we analyse the impact of financial shocks on firms' markups, and, in particular, the ability of these shocks to generate heterogeneous markup dynamics across firms. ContributionWe do so by combining two state-of-the-art approaches and detailed German micro data from the Bundesbank for the years 2007-2013, which allow us to obtain estimates of both markups and financial shocks that vary across firms and time. By using matched bankfirm-level data, we can estimate bank-loan supply shifters that are exogenous from the perspective of the firm. Moreover, we follow a widely used approach, and corresponding applications and extensions, in order to estimate firm-level markups using data on firms' financial accounts. We can thus study the role of financial shocks in driving firm-level markups. Moreover, we investigate the economic mechanisms behind our results and gauge their implications at the aggregate level. ResultsWe find that markup responses to bank-credit supply shocks are heterogeneous across firms. In particular, firms more exposed to liquidity risks tend to raise markups in response to negative bank-loan supply shocks, while less exposed firms generally reduce them. The effects we find turn out to occur only contemporaneously, to be driven by more negative financial shocks, and to take place mainly during the financial crisis period. Further empirical analyses suggest that our findings are mostly consistent with models featuring a sticky customer base, where financially constrained firms have an incentive to raise markups in order to sustain liquidity. Finally, we present evidence that financial frictions can introduce a countercyclical dimension in the aggregate markup. Nichttechnische Zusammenfassung FragestellungJüngere Forschungsarbeiten zeigen, dass die Heterogenität von Unternehmen eine wichtige Rolle für die Entwicklung der durchschnittlichen Preisaufschläge in einer Volkswirtschaft spielt. Dabei können unterschiedliche Faktoren die Margen von Unternehmen auf verschiedene Weisen beeinflussen. In diesem Papier wird der Einfluss von Finanzmarktfriktionen auf die Preisaufschläge von Firmen analysiert. Dabei wird insbesondere untersucht, inwieweit Finanzmarktschocks heterogene Margenanpassungen bei Unternehmen verursachen. Beitrag Dazu werden auf Basis moderner empirischer Ansätze und detaillierter deutscher Mikrodaten der Bundesbank für die Jahre 2007 bis 2013 Finanzmarktschocks und Preisaufschläge geschätzt, die über Unternehmen und Jahre variieren. Insbesondere können anhand von Einzeldaten zur Kreditvergabe von Banken an Unternehmen Finanzmarktstörungen geschätzt werden, die Bankkreditangebotsschocks entsprechen und daher aus Sicht der Unternehmen exogen bedingt sind. Zudem werden auf Basis einer weitverbreiteten Methode Preisaufschläge von Firmen anhand von Bilanzinf...

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Section: The Role Of the Crisissupporting

confidence: 63%

“…This control variable can be important since some recent studies find that bank-loan supply and firm-borrowing demand tend to be negatively correlated at the firm level, implying that the impact of bank-loan supply shocks is underestimated when adequate credit demand controls are absent (e.g Alfaro, García-Santana, and Moral-Benito, 2021)…”

mentioning

confidence: 99%

Markups and Financial Shocks

Meinen

Soares

2021

SSRN Journal

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“…Some of these papers focus on the effects of crises in emerging economies (e.g., Khwaja and Mian (2008), Kalemli-Ozcan, Kamil, and Villegas-Sanchez (2016)), while others study the 2008 financial crisis in the U.S. (e.g., Chodorow-Reich (2013), Chava and Purnanandam (2011), Adrian, Colla, and Shin (2012), Montoriol-Garriga and Wang (2012), Duygan-Bump, Levkov, and Montoriol-Garriga (2014) and Greenstone, Mas, and Nguyen (2014)), the European Sovereign Debt crisis (e.g., Jiménez et al (2014), Bottero, Lenzu, and Mezzanotti (2015) and Alfaro, García-Santana, and Moral-Benito (2019)) or the real estate crisis in Japan (e.g., Gan (2007) and Amiti and Weinstein (2018)). 4 An important contribution of this line of research has been to develop an approach to identify credit supply shocks based on the observation that, as in our model, credit relationships are sticky and firms that borrow from a healthier, less exposed bank (or network of banks) have less difficulty obtaining credit after a crisis.…”

Section: Literature Reviewmentioning

confidence: 99%

“…They find significant effects of these shocks on firms' capital expenditure. Last, Alfaro, García-Santana, and Moral-Benito (2019) combine registry data for all firms in Spain with bank-firm level data and firm-specific measures of upstream vs downstream exposure and find that credit shocks have significant effects on investment but not on employment during the recovery. Using the Spanish input-output matrix they also document that the downstream effects are quantitatively even larger than the direct effects.…”

Section: Literature Reviewmentioning

confidence: 99%

Relationship Networks in Banking Around a Sovereign Default and Currency Crisis

D’Erasmo

Boedo

Olivero

et al. 2019

Working Paper (Federal Reserve Bank of Philadelphia)

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We study how banks' exposure to a sovereign crisis gets transmitted onto the corporate sector. To do so we use data on the universe of banks and firms in Argentina during the crisis of 2001. We build a model characterized by matching frictions in which firms establish (long-term) relationships with banks that are subject to balance sheet disruptions. Credit relationships with banks more exposed to the crisis suffer the most. However, this relationship-level effect overstates the true cost of the crisis since profitable firms (e.g., exporters after a devaluation) might find it optimal to switch lenders, reducing the negative impact on overall credit and activity. Using linked bank-firm and firm-level data we find evidence largely consistent with our theory.

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“…Our paper builds on the literature on the granular origins of business cycle fluctuations (see, e.g., Gabaix (2011);di Giovanni et al (2014)) and relates to the strand of the literature that studies the effect on bank heterogeneity on aggregate outcomes (Buch and Neugebauer, 2011;Bremus et al, 2018;Amiti and Weinstein, 2018;Alfaro et al, 2021).…”

Section: Introductionmentioning

confidence: 99%