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Desertification in Spain: Is there any impact on credit to firms?

Author

Listed:
  • Carmen Broto

    (BANCO DE ESPAÑA)

  • Olivier Hubert

    (BANCO DE ESPAÑA)

Abstract

We study whether the process of desertification in Spain has an impact on the volume of credit granted to Spanish non-financial corporations (NFCs). To this end, we use a panel data model at the municipal level from 1984 to 2019 for bank loans obtained from the Banco de España’s central credit register, where the main explanatory variable is the aridity index. Given that aridity is a long-term climatic phenomenon, we also estimate the model with local projections (Jordà, 2005) to disentangle the impact of aridity on credit to NFCs over longer horizons. Consistent with the literature, we find that higher aridity leads to lower credit to firms, at both short and long-term horizons. We also show that the effect of aridity on credit is sector-specific and depends on the climate zone. Credit to the agricultural sector is most negatively affected by this climatic hazard, while this phenomenon leads to more credit to the tourism sector in the most humid regions.

Suggested Citation

  • Carmen Broto & Olivier Hubert, 2025. "Desertification in Spain: Is there any impact on credit to firms?," Working Papers 2513, Banco de España.
    • Handle: RePEc:bde:wpaper:2513
    DOI: https://doi.org/10.53479/39119
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    More about this item

    Keywords

    climate change; credit; aridity index; non-financial corporations; panel data model; local projections;
    All these keywords.

    JEL classification:

    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • Q51 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Valuation of Environmental Effects
    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers

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