IDEAS home Printed from https://ideas.repec.org/p/bdm/wpaper/2024-16.html
   My bibliography  Save this paper

The Real Effects of Credit Supply Shocks During the COVID-19 Pandemic

Author

Listed:
  • Alex Rivadeneira
  • Carlo Alcaraz
  • Nicolás Amoroso
  • Rodolfo Oviedo
  • Brenda Samaniego
  • Horacio Sapriza

Abstract

We study the real effects of credit supply shocks during the COVID-19 pandemic in Mexico. To this end, we merge administrative micro-level data on the universe of bank loans to firms with matched employer-employee social security records. For each firm, we measure its exposure to time-varying credit supply shocks. We find that a negative credit shock of one standard deviation would have increased a firm's exit probability by 0.15 percentage points (pp) and decreased its annual employment growth by 1 pp. These effects were most pronounced among unincorporated businesses, small and young firms, and those in non-essential sectors. Negative credit supply shocks led to higher separation rates for workers with low layoff costs, like those with low tenure or temporary contracts.

Suggested Citation

  • Alex Rivadeneira & Carlo Alcaraz & Nicolás Amoroso & Rodolfo Oviedo & Brenda Samaniego & Horacio Sapriza, 2024. "The Real Effects of Credit Supply Shocks During the COVID-19 Pandemic," Working Papers 2024-16, Banco de México.
    • Handle: RePEc:bdm:wpaper:2024-16
    as

    Download full text from publisher

    File URL: https://www.banxico.org.mx/publications-and-press/banco-de-mexico-working-papers/%7BDFA9FE50-8521-0964-9F46-E8C67EEDE6C7%7D.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Viral V Acharya & Tim Eisert & Christian Eufinger & Christian Hirsch, 2018. "Real Effects of the Sovereign Debt Crisis in Europe: Evidence from Syndicated Loans," The Review of Financial Studies, Society for Financial Studies, vol. 31(8), pages 2855-2896.
    2. Andrea Caggese & Vicente Cuñat, 2008. "Financing Constraints and Fixed‐term Employment Contracts," Economic Journal, Royal Economic Society, vol. 118(533), pages 2013-2046, November.
    3. Lei Li & Philip E Strahan & Song Zhang, 2020. "Banks as Lenders of First Resort: Evidence from the COVID-19 Crisis," The Review of Corporate Finance Studies, Society for Financial Studies, vol. 9(3), pages 472-500.
    4. Caggese, Andrea & Cuñat, Vicente & Metzger, Daniel, 2019. "Firing the wrong workers: Financing constraints and labor misallocation," Journal of Financial Economics, Elsevier, vol. 133(3), pages 589-607.
    5. Bottero, Margherita & Lenzu, Simone & Mezzanotti, Filippo, 2020. "Sovereign debt exposure and the bank lending channel: Impact on credit supply and the real economy," Journal of International Economics, Elsevier, vol. 126(C).
    6. Osuna-Gomez, Daniel, 2023. "The impact of the COVID-19 pandemic on post-great recession entrants: Evidence from Mexico," Labour Economics, Elsevier, vol. 81(C).
    7. Barone, Guglielmo & Felici, Roberto & Pagnini, Marcello, 2011. "Switching costs in local credit markets," International Journal of Industrial Organization, Elsevier, vol. 29(6), pages 694-704.
    8. Morais, Bernardo & Peydró, José-Luis & Roldán Peña, Jessica & Ruiz Ortega, Claudia, 2019. "The International Bank Lending Channel of Monetary Policy Rates and QE: Credit Supply, Reach-for-Yield, and Real Effects," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 74(1), pages 55-90.
    9. John (Jianqiu) Bai & Daniel Carvalho & Gordon M. Phillips, 2018. "The Impact of Bank Credit on Labor Reallocation and Aggregate Industry Productivity," Journal of Finance, American Finance Association, vol. 73(6), pages 2787-2836, December.
    10. Luca Gambetti & Alberto Musso, 2017. "Loan Supply Shocks and the Business Cycle," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 32(4), pages 764-782, June.
    11. Bluedorn, John & Caselli, Francesca & Hansen, Niels-Jakob & Shibata, Ippei & Tavares, Marina M., 2023. "Gender and employment in the COVID-19 recession: Cross-Country evidence on “She-Cessions”," Labour Economics, Elsevier, vol. 81(C).
    12. Lauren Hoehn-Velasco & Adan Silverio-Murillo & Jose Roberto Balmori de la Miyar & Jacob Penglase, 2022. "The impact of the COVID-19 recession on Mexican households: evidence from employment and time use for men, women, and children," Review of Economics of the Household, Springer, vol. 20(3), pages 763-797, September.
    13. Becker, Bo & Ivashina, Victoria, 2014. "Cyclicality of credit supply: Firm level evidence," Journal of Monetary Economics, Elsevier, vol. 62(C), pages 76-93.
    14. International Monetary Fund, 2020. "Mexico: 2020 Article IV Consultation-Press Release; and Staff Report," IMF Staff Country Reports 2020/293, International Monetary Fund.
    15. Degryse, Hans & De Jonghe, Olivier & Jakovljević, Sanja & Mulier, Klaas & Schepens, Glenn, 2019. "Identifying credit supply shocks with bank-firm data: Methods and applications," Journal of Financial Intermediation, Elsevier, vol. 40(C).
    16. Asim Ijaz Khwaja & Atif Mian, 2008. "Tracing the Impact of Bank Liquidity Shocks: Evidence from an Emerging Market," American Economic Review, American Economic Association, vol. 98(4), pages 1413-1442, September.
    17. Steven J. Davis & John C. Haltiwanger & Scott Schuh, 1998. "Job Creation and Destruction," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262540932, December.
    18. Anna M. Costello, 2020. "Credit Market Disruptions and Liquidity Spillover Effects in the Supply Chain," Journal of Political Economy, University of Chicago Press, vol. 128(9), pages 3434-3468.
    19. Tobias Berg, 2018. "Got Rejected? Real Effects of Not Getting a Loan," The Review of Financial Studies, Society for Financial Studies, vol. 31(12), pages 4912-4957.
    20. Alberto Abadie & Susan Athey & Guido W Imbens & Jeffrey M Wooldridge, 2023. "When Should You Adjust Standard Errors for Clustering?," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 138(1), pages 1-35.
    21. Lei Li & Philip E. Strahan & Song Zhang, 2020. "Banks as Lenders of First Resort: Evidence from the COVID-19 Crisis," NBER Working Papers 27256, National Bureau of Economic Research, Inc.
    22. Emilio Gutierrez & David Jaume & Martín Tobal, 2023. "Do Credit Supply Shocks Affect Employment in Middle-Income Countries?," American Economic Journal: Economic Policy, American Economic Association, vol. 15(4), pages 1-36, November.
    23. Barbieri, Claudio & Couaillier, Cyril & Perales, Cristian & Rodriguez d’Acri, Costanza, 2022. "Informing macroprudential policy choices using credit supply and demand decompositions," Working Paper Series 2702, European Central Bank.
    24. Regis Barnichon & Christian Matthes & Alexander Ziegenbein, 2022. "Are the Effects of Financial Market Disruptions Big or Small?," The Review of Economics and Statistics, MIT Press, vol. 104(3), pages 557-570, May.
    25. Michael Siemer, 2019. "Employment Effects of Financial Constraints during the Great Recession," The Review of Economics and Statistics, MIT Press, vol. 101(1), pages 16-29, March.
    26. Tielens, Joris & Van Hove, Jan, 2017. "The Amiti–Weinstein estimator: An equivalence result," Economics Letters, Elsevier, vol. 151(C), pages 19-22.
    27. Petersen, Mitchell A & Rajan, Raghuram G, 1994. "The Benefits of Lending Relationships: Evidence from Small Business Data," Journal of Finance, American Finance Association, vol. 49(1), pages 3-37, March.
    28. Viollaz Mariana & Salazar-Saenz Mauricio & Flabbi Luca & Bustelo Monserrat & Bosch Mariano, 2023. "The COVID-19 Pandemic in Latin American and Caribbean countries: Gender Differentials in Labor Market Dynamics," IZA Journal of Development and Migration, Sciendo & Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 14(1), pages 1-57, January.
    29. John Haltiwanger & Ron S. Jarmin & Javier Miranda, 2013. "Who Creates Jobs? Small versus Large versus Young," The Review of Economics and Statistics, MIT Press, vol. 95(2), pages 347-361, May.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Ozan Güler & Mike Mariathasan & Klaas Mulier & Nejat G. Okatan, 2021. "The real effects of banks' corporate credit supply: A literature review," Economic Inquiry, Western Economic Association International, vol. 59(3), pages 1252-1285, July.
    2. Guler, Ozan & Mariathasan, Mike & Mulier, Klaas & Okatan, Nejat G., 2019. "The Real Effects of Credit Supply: Review, Synthesis, and Future Directions," MPRA Paper 96542, University Library of Munich, Germany.
    3. Sobiech, Anna L. & Chronopoulos, Dimitris K. & Wilson, John O.S., 2021. "The real effects of bank taxation: Evidence for corporate financing and investment," Journal of Corporate Finance, Elsevier, vol. 69(C).
    4. von Schweinitz, Gregor, 2023. "The importance of credit demand for business cycle dynamics," IWH Discussion Papers 21/2023, Halle Institute for Economic Research (IWH).
    5. Barbosa, Luciana & Bilan, Andrada & Célérier, Claire, 2019. "Credit supply and human capital: evidence from bank pension liabilities," Working Paper Series 2271, European Central Bank.
    6. Temesvary, Judit & Wei, Andrew, 2024. "Domestic lending and the pandemic: How does banks’ exposure to COVID-19 abroad affect their lending in the United States?," Journal of International Money and Finance, Elsevier, vol. 143(C).
    7. Finaldi Russo, Paolo & Nigro, Valentina & Pastorelli, Sabrina, 2024. "Bank lending to small firms: Metamorphosis of a financing model," International Review of Economics & Finance, Elsevier, vol. 90(C), pages 13-31.
    8. Judit Temesvary & Andrew Wei, 2021. "Domestic Lending and the Pandemic: How Does Banks' Exposure to Covid-19 Abroad Affect Their Lending in the United States?," Finance and Economics Discussion Series 2021-056r1, Board of Governors of the Federal Reserve System (U.S.), revised 17 Nov 2021.
    9. Huneeus, Federico & Kaboski, Joseph & Larrain, Mauricio & Schmukler, Sergio L. & Vera, Mario, 2022. "The Distribution of Crisis Credit: Effects on Firm Indebtedness and Aggregate Risk," CEPR Discussion Papers 17061, C.E.P.R. Discussion Papers.
    10. Alves, Nuno & Bonfim, Diana & Soares, Carla, 2021. "Surviving the perfect storm: The role of the lender of last resort☆," Journal of Financial Intermediation, Elsevier, vol. 47(C).
    11. Bo Becker & Efraim Benmelech, 2021. "The Resilience of the U.S. Corporate Bond Market During Financial Crises," NBER Working Papers 28868, National Bureau of Economic Research, Inc.
    12. Bersch, Johannes & Degryse, Hans & Kick, Thomas & Stein, Ingrid, 2020. "The real effects of bank distress: Evidence from bank bailouts in Germany," Journal of Corporate Finance, Elsevier, vol. 60(C).
    13. Cahn, Christophe & Duquerroy, Anne & Mullins, William, 2017. "Unconventional Monetary Policy and Bank Lending Relationships," SocArXiv vgk25, Center for Open Science.
    14. Pablo D’Erasmo & Hernán Moscoso Boedo & María Pía Olivero & Máximo Sangiácomo, 2020. "Relationship Networks in Banking Around a Sovereign Default and Currency Crisis," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 68(3), pages 584-642, September.
    15. Berger, Allen N. & Molyneux, Phil & Wilson, John O.S., 2020. "Banks and the real economy: An assessment of the research," Journal of Corporate Finance, Elsevier, vol. 62(C).
    16. Fabio Berton & Sauro Mocetti & Andrea F. Presbitero & Matteo Richiardi, 2018. "Banks, Firms, and Jobs," The Review of Financial Studies, Society for Financial Studies, vol. 31(6), pages 2113-2156.
    17. Balduzzi, Pierluigi & Brancati, Emanuele & Schiantarelli, Fabio, 2018. "Financial markets, banks’ cost of funding, and firms’ decisions: Lessons from two crises," Journal of Financial Intermediation, Elsevier, vol. 36(C), pages 1-15.
    18. Dwenger, Nadja & Fossen, Frank & Simmler, Martin, 2015. "From financial to real economic crisis. Evidence from individual firm-bank relationships in Germany," VfS Annual Conference 2015 (Muenster): Economic Development - Theory and Policy 113000, Verein für Socialpolitik / German Economic Association.
    19. Rhys Bidder & John Krainer & Adam Shapiro, 2021. "De-leveraging or de-risking? How banks cope with loss," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 39, pages 100-127, January.
    20. Pietro Grandi & Jean Belin & Elisa Darriet & Marianne Guille, 2024. "SMEs, R &D financing, and credit shocks," Small Business Economics, Springer, vol. 63(1), pages 325-347, June.

    More about this item

    Keywords

    Banks; credit supply shocks; employment;
    All these keywords.

    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bdm:wpaper:2024-16. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Subgerencia de desarrollo de sistemas (email available below). General contact details of provider: https://edirc.repec.org/data/bangvmx.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.