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The role of credit in regional divergence: Spanish regions and Eurozone countries

Author

Listed:
  • Sheila C. Dow
  • Carlos J. Rodríguez-Fuentes

Abstract

This paper provides a theoretical account of the role of regional differences in cyclical patterns of credit availability for patterns of regional convergence or divergence. While mainstream theories imply either equalising regional capital flows, or else lower credit availability for peripheral regions due to market imperfections, Post-Keynesian theory of liquidity preference and financial structure imply the scope for greater credit volatility for peripheral regions, especially in downturns, contributing to real economic divergence. This latter account is assessed by means of an empirical analysis of patterns in bank credit over the business cycle among the Spanish regions and Eurozone countries. JEL Classification: B5; E5; R11.

Suggested Citation

  • Sheila C. Dow & Carlos J. Rodríguez-Fuentes, 2020. "The role of credit in regional divergence: Spanish regions and Eurozone countries," Brazilian Journal of Political Economy, Center of Political Economy, vol. 40(4), pages 712-727.
    • Handle: RePEc:ekm:repojs:v:40:y:2020:i:4:p:712-727:id:2081
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    More about this item

    Keywords

    Credit procyclicality; liquidity preference; Post-Keynesian regional credit theory; Human P. Minsky;
    All these keywords.

    JEL classification:

    • B5 - Schools of Economic Thought and Methodology - - Current Heterodox Approaches
    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes

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