Journal Article

Does Credit Crunch Investment Down? New Evidence on the Real Effects of the Bank-Lending Channel

Federico Cingano, Francesco Manaresi and Enrico Sette

in The Review of Financial Studies

Published on behalf of The Society for Financial Studies

Volume 29, issue 10, pages 2737-2773
Published in print October 2016 | ISSN: 0893-9454
Published online June 2016 | e-ISSN: 1465-7368 | DOI: https://dx.doi.org/10.1093/rfs/hhw040
Does Credit Crunch Investment Down? New Evidence on the Real Effects of the Bank-Lending Channel

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  • Macroeconomics: Consumption, Saving, Production, Employment, and Investment
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We quantify the real effects of the bank-lending channel exploiting the dramatic liquidity drought in interbank markets that followed the 2007 financial crisis as a source of variation in credit supply. Using a large sample of matched firm–bank data from Italy, we find had the interbank market not collapsed, investment expenditure would have been more than 20% higher and would have increased by around 30 cents per additional euro of available credit at the average firm. We also find that credit shocks affect the firm's value added, employment and input purchases, and propagate through firms' trade credit chains.

Received July 8, 2014; accepted April 12, 2016 by Editor Andrew Karolyi.

Keywords: E22; E44; G01; G21; G32

Journal Article.  17177 words.  Illustrated.

Subjects: Macroeconomics: Consumption, Saving, Production, Employment, and Investment ; Money and Interest Rates ; Economics ; Banking ; Corporate Governance

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