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Credit allocation to businesses in Italy amid the Covid-19 crisis

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  • Cuciniello, Vincenzo

Abstract

This note investigates the credit allocation process to businesses in Italy during the Covid-19 crisis, utilizing methodologies from Herrera et al. (2011) for gross credit flows and Cuciniello and di Iasio (2020) for the intensive and extensive margins. It reveals that the surge in net credit flows was primarily driven by gross credit expansion, with about 50 percent of the fluctuation attributed to the rise in public guaranteed loans. Additionally, fluctuations in credit expansion are predominantly influenced by the intensive margin, particularly the debt increase of firms with pre-existing multiple bank relationships, where lenders have lower exposure to their debt.

Suggested Citation

  • Cuciniello, Vincenzo, 2024. "Credit allocation to businesses in Italy amid the Covid-19 crisis," Economics Letters, Elsevier, vol. 238(C).
    • Handle: RePEc:eee:ecolet:v:238:y:2024:i:c:s0165176524002076
    DOI: 10.1016/j.econlet.2024.111724
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    References listed on IDEAS

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    1. Olivier Darmouni, 2020. "Informational Frictions and the Credit Crunch," Journal of Finance, American Finance Association, vol. 75(4), pages 2055-2094, August.
    2. Giuseppe Cascarino & Raffaele Gallo & Francesco Palazzo & Enrico Sette, 2022. "Public guarantees and credit additionality during the Covid-19 pandemic," Temi di discussione (Economic working papers) 1369, Bank of Italy, Economic Research and International Relations Area.
    3. Vincenzo Cuciniello & Nicola di Iasio, 2020. "Determinants of the credit cycle: a flow analysis of the extensive margin," Temi di discussione (Economic working papers) 1266, Bank of Italy, Economic Research and International Relations Area.
    4. Herrera, Ana Maria & Kolar, Marek & Minetti, Raoul, 2011. "Credit reallocation," Journal of Monetary Economics, Elsevier, vol. 58(6), pages 551-563.
    5. Srinivasan, Anand, 2014. "Long Run Relationships in Banking," Foundations and Trends(R) in Finance, now publishers, vol. 8(2), pages 55-143, October.
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