Credit Supply and Productivity Growth
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Summary:
We study the impact of bank credit on firm productivity. We exploit a matched firm-bank database covering all the credit relationships of Italian corporations, together with a natural experiment, to measure idiosyncratic supply-side shocks to credit availability and to estimate a production model augmented with financial frictions. We find that a contraction in credit supply causes a reduction of firm TFP growth and also harms IT-adoption, innovation, exporting, and adoption of superior management practices, while a credit expansion has limited impact. Quantitatively, the credit contraction between 2007 and 2009 accounts for about a quarter of observed the decline in TFP.
Series:
Working Paper No. 2019/107
Subject:
Bank credit Banking Credit Economic theory Financial markets Interbank markets Money Production Productivity Supply shocks
English
Publication Date:
May 17, 2019
ISBN/ISSN:
9781498315258/1018-5941
Stock No:
WPIEA2019107
Pages:
75
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