On the Direct and Indirect Real Effects of Credit Supply Shocks
We consider the real effects of bank lending shocks and how they permeate the economy through buyer-supplier linkages. We combine administrative data on all firms in Spain with a matched bank-firm-loan dataset on the universe of corporate loans for 2003-2013 to identify bank-specific shocks for each year using methods from the matched employer-employee literature. We construct firm-specific exogenous credit supply shocks and estimate their direct and indirect effects on real activity using firm-specific measures of upstream and downstream exposure. Credit supply shocks have sizable direct and downstream propagation effects on investment and output throughout the period, especially during the 2008-2009 global financial crisis. In terms of mechanisms, trade credit extended by suppliers and price adjustments play a role in accounting for downstream propagation of financial shocks.
Published Versions
Laura Alfaro & Manuel García-Santana & Enrique Moral-Benito, 2020. "On the direct and indirect real effects of credit supply shocks," Journal of Financial Economics, . citation courtesy of 
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