The Heterogeneous Response of Domestic Sales and Exports to Bank Credit Shocks

57 Pages Posted: 26 Oct 2016

Date Written: June 28, 2016

Abstract

This paper analyzes the role of bank credit in firms' export performance. We use Italian bank-firm matched data and contribute to the existing literature by focusing on the link between bank-credit and exports in 'normal times' (1997-2008) and measuring access to credit with hard data on the credit actually extended to firms by the banking system. We also establish the causal link that goes from bank credit to exports, exploiting bank mergers and acquisitions as a source of bank credit supply shocks. We find that short-run shocks to the supply of bank credit induce exporters to decrease their export flows, without affecting their domestic sales. On the other hand, non-exporters react by reducing their domestic sales.

Keywords: export, bank lending channel, credit shocks, mergers and acquisitions

JEL Classification: F14, G21, G34

Suggested Citation

Buono, Ines and Formai, Sara, The Heterogeneous Response of Domestic Sales and Exports to Bank Credit Shocks (June 28, 2016). Bank of Italy Temi di Discussione (Working Paper) No. 1066, Available at SSRN: https://ssrn.com/abstract=2859463 or http://dx.doi.org/10.2139/ssrn.2859463

Ines Buono (Contact Author)

Bank of Italy ( email )

Via Nazionale 91
Rome, 00184
Italy

Sara Formai

Bank of Italy ( email )

Via Nazionale 91
Rome, 00184
Italy

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