Who Needs Credit and Who Gets Credit in Eastern Europe?

52 Pages Posted: 6 Feb 2012

See all articles by Steven Ongena

Steven Ongena

University of Zurich - Department of Banking and Finance; Swiss Finance Institute; KU Leuven; Centre for Economic Policy Research (CEPR)

Alexander A. Popov

European Central Bank (ECB)

Pinar Yesin

Swiss National Bank

Martin Brown

University of St. Gallen

Date Written: December 7, 2011

Abstract

Based on survey data covering 8,387 firms in 20 countries we compare credit demand and credit supply for firms in Eastern Europe to those for firms in selected Western European countries. We find that firms in Eastern Europe have a higher need for credit than firms in Western Europe, and that a higher share of firms is discouraged from applying for a loan. The higher rate of discouraged firms in Eastern Europe is driven more by the presence of foreign banks than by the macroeconomic environment or the lack of creditor protection. We find no evidence that foreign bank presence leads to stricter loan approval decisions. Finally, credit constraints do have a real cost in that firms which are denied credit or discouraged from applying are less likely to invest in R&D and introduce new products.

Keywords: credit constraints, banking sector, transition economies

JEL Classification: G21, G30, F34

Suggested Citation

Ongena, Steven R. G. and Popov, Alexander A. and Yeşin, Pınar and Brown, Martin, Who Needs Credit and Who Gets Credit in Eastern Europe? (December 7, 2011). ECB Working Paper No. 1421. Available at SSRN: https://ssrn.com/abstract=1969367

Steven R. G. Ongena (Contact Author)

University of Zurich - Department of Banking and Finance ( email )

Schönberggasse 1
Zürich, 8001
Switzerland

Swiss Finance Institute

c/o University of Geneva
40, Bd du Pont-d'Arve
CH-1211 Geneva 4
Switzerland

KU Leuven ( email )

Oude Markt 13
Leuven, Vlaams-Brabant 3000
Belgium

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Alexander A. Popov

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

Pınar Yeşin

Swiss National Bank ( email )

Boersenstrasse 15, P.O.Box
Zuerich, CH-8022
Switzerland
41-58-631-3969 (Phone)

HOME PAGE: http://www.pinaryesin.com

Martin Brown

University of St. Gallen ( email )

Unterer Graben 21
St. Gallen, CH-9000
Switzerland

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