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The Credit-Output Relationship During the Recovery from Recession

Author

Listed:
  • Fabrizio Coricelli

    (PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique)

  • Marco Frigerio,

Abstract

The Great Recession has generated renewed interest in the phenomenon of creditless recoveries. This paper studies the mechanisms behind such phenomenon, analyzing data on industries for a large set of countries over a forty year period from 1963 to 2003. We find that during creditless recoveries there is a significant reallocation of resources away from sectors that are more dependent on bank credit, both for their investments and for their short-term liquidity needs. The adverse effects of credit constraints are softened in sectors that rely more on alternative sources of financing, such as trade credit, or in sectors that have more favorable access to credit because of higher collateral. We thus conclude that creditless recoveries do not simply reflect a natural process of deleveraging, but they may imply significant inefficiencies in the allocation of resources.

Suggested Citation

  • Fabrizio Coricelli & Marco Frigerio,, 2015. "The Credit-Output Relationship During the Recovery from Recession," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-01267259, HAL.
    • Handle: RePEc:hal:cesptp:halshs-01267259
    DOI: 10.1007/s11079-015-9354-z
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    Cited by:

    1. Fabrizio Coricelli & Marco Frigerio, 2019. "Interenterprise Credit and Adjustment during Financial Crises: The Role of Firm Size," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 51(6), pages 1547-1580, September.
    2. Jin, Yuying & Luo, Mingjin & Wan, Chao, 2018. "Financial constraints, macro-financing environment and post-crisis recovery of firms," International Review of Economics & Finance, Elsevier, vol. 55(C), pages 54-67.
    3. Corrado, Luisa & Rossi, Isolina, 2019. "Anatomy of credit-less recoveries," Journal of Macroeconomics, Elsevier, vol. 62(C).
    4. Roman Horvath, 2018. "Financial market fragmentation and monetary transmission in the euro area: what do we know?," Journal of Economic Policy Reform, Taylor & Francis Journals, vol. 21(4), pages 319-334, October.
    5. Shino Takayama & Yuki Tamura & Terence Yeo, 2019. "Primaries, Strategic Voters and Heterogenous Valences," Discussion Papers Series 605, School of Economics, University of Queensland, Australia.
    6. Lingguo Xu & Peter E. Earl & D. S. Prasada Rao, 2019. "Materialism and Economic Progress," Discussion Papers Series 604, School of Economics, University of Queensland, Australia.

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    More about this item

    Keywords

    Financial crises; Bank credit vs trade credit; Creditless recoveries;
    All these keywords.

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • G01 - Financial Economics - - General - - - Financial Crises

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