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Autre Publication Scientifique Année : 2010

Credit and recessions

Résumé

The paper develops a simple model on the asymmetric role of credit markets in output fluctuations. When credit markets are underdeveloped and enterprise activity is financed by trade credit, shocks may induce a break-up of credit and production chains, leading to sudden and sharp contractions. The development of a banking sector can reduce the probability of such collapses and hence plays a crucial role in softening output declines. However, the banking sector becomes a shock amplifier when shocks originate in the financial sector. Using industry-level data across a large cross-section of countries, we provide evidence in support of the model's predictions.
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Dates et versions

halshs-00469521 , version 1 (01-04-2010)

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  • HAL Id : halshs-00469521 , version 1

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Fabrizio Coricelli, Isabelle Roland. Credit and recessions. 2010. ⟨halshs-00469521⟩
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