The Real Effects of Financial Sector Interventions During Crises
By Luc Laeven, Fabián Valencia. Social Science Research Network, 2011
207 citations recorded by the source corpus.
We collect new data to assess the importance of supply-side credit market frictions by studying the impact of financial sector recapitalization packages on the growth performance of firms in a large cross-section of 50 countries during the recent crisis. We develop an identification strategy that uses the financial crisis as a shock to credit supply and exploits exogenous variation in the degree to which firms depend on external financing for investment needs, and focus on policy interventions aimed at alleviating the bank capital crunch. We find that the growth of firms dependent on external financing is disproportionately positively affected by bank recapitalization policies, and that this effect is quantitatively important and robust to controlling for other financial sector support policies. We also find that fiscal policy disproportionately boosted growth of firms more dependent on external financing. These results provide new evidence of a quantitatively important role of credit market frictions in influencing real economic activity.
Subfields: Accounting, Finance
View Paper: https://www.semanticscholar.org/paper/7a8bf723f6f012cfd02492748f2edbbc6d03338d
Citations in the corpus
- From the Financial Crisis to the Real Economy: Using Firm-Level Data to Identify Transmission Channels (2012, unknown): “Our first measure of monetary stimulus is proxied by the change in nominal shortterm interest rates from September 2008 to March 2009 as also used in Laeven and Valencia (2011).”
- Systemic Banking Crises Database II (2013, unknown): “In Laeven and Valencia (2013a), we showed that many episodes in our dataset could be replicated by a simple alternative definition based on credit and real GDP growth, particularly in high-income countries.”
- CEO Overconfidence and Financial Crisis: Evidence from Bank Lending and Leverage (2015, unknown): “14 the most recent financial crisis usually defines it as the period from the 2008 liquidation of Lehman Brothers to 2009 (Laeven and Valencia, 2013), we end our sample in 2009.”