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The Impact of REACTIVA on the Real Economy and on Bank Risk-Taking

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  • Acurio, Balila

    (Banco Central de Reserva del Perú)

  • Pardo, Renzo

    (Banco Central de Reserva del Perú)

  • Peydró, José Luis

    (Banco Central de Reserva del Perú)

  • Pozo, Jorge

    (Banco Central de Reserva del Perú)

Abstract

We analyze empirically the impact on the credit market, including bank risk-taking, as well as the associated real effects of REACTIVA Peru, a Peruvian public credit guaranteed program oriented to avoid a severe reduction in the economic activity and the credit market. We use matched administrative datasets: the exhaustive credit register and firm-level monthly employment data. Our results suggest that REACTIVA reduces bank risk (defaults) of the total credit portfolio, as well as it has a positive impact on the real economy – firm employment–, both at the intensive and extensive margins. In addition, our results suggest that in normal times there could be a trade-off between bank risk-taking and economic activity: REACTIVA avoids a stronger contraction of the real economy, due to a positive impact on employment, and increases bank willingness to take risk, captured by an increase of the risk of the non-REACTIVA credit portfolio. However, during the Covid-19 shock, this finding is associated with the desired impact of REACTIVA in diminishing any excessive increment of bank risk aversion.

Suggested Citation

  • Acurio, Balila & Pardo, Renzo & Peydró, José Luis & Pozo, Jorge, 2023. "The Impact of REACTIVA on the Real Economy and on Bank Risk-Taking," Working Papers 2023-005, Banco Central de Reserva del Perú.
    • Handle: RePEc:rbp:wpaper:2023-005
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    References listed on IDEAS

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    1. Altavilla, Carlo & Barbiero, Francesca & Boucinha, Miguel & Burlon, Lorenzo, 2023. "The Great Lockdown: Pandemic response policies and bank lending conditions," European Economic Review, Elsevier, vol. 156(C).
    2. Viral V Acharya & Tim Eisert & Christian Eufinger & Christian Hirsch, 2019. "Whatever It Takes: The Real Effects of Unconventional Monetary Policy," The Review of Financial Studies, Society for Financial Studies, vol. 32(9), pages 3366-3411.
    3. Alessio Anzuini & Luca Rossi, 2022. "Unconventional monetary policies and expectations on economic variables," Empirical Economics, Springer, vol. 63(6), pages 3027-3043, December.
    4. Callaway, Brantly & Sant’Anna, Pedro H.C., 2021. "Difference-in-Differences with multiple time periods," Journal of Econometrics, Elsevier, vol. 225(2), pages 200-230.
    5. Humala, Alberto, 2020. "Programas de apoyo al crédito por el COVID-19: Experiencia internacional," Revista Moneda, Banco Central de Reserva del Perú, issue 183, pages 14-20.
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