The real effects of financial sector interventions during crises

L. Laeven, F. Valencia

Research output: Contribution to journalArticleScientificpeer-review

Abstract

We assess the importance of supply-side credit market frictions by studying the impact of bank recapitalization on firm growth in 50 countries during the recent crisis. Our identification strategy exploits the crisis as a shock to credit supply and combines an exogenous measure of firms’ dependence on external financing with policy interventions aimed at restoring bank capital. We find that the growth of financially dependent firms is disproportionately positively affected by bank recapitalization. This effect is quantitatively important and robust to controlling for other policies. These results provide new evidence of the influence of credit market frictions on economic activity.
Original languageEnglish
Pages (from-to)147-177
JournalJournal of Money, Credit and Banking
Volume45
Issue number1
DOIs
Publication statusPublished - 2013

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Market frictions
Credit markets
Recapitalization
Financial sector
Policy intervention
Supply side
Bank capital
Firm growth
External financing
Credit supply
Economic activity

Cite this

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The real effects of financial sector interventions during crises. / Laeven, L.; Valencia, F.

In: Journal of Money, Credit and Banking, Vol. 45, No. 1, 2013, p. 147-177.

Research output: Contribution to journalArticleScientificpeer-review

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