Investment Slumps During Financial Crises: The Real Effects of Credit Supply

74 Pages Posted: 30 Jun 2018 Last revised: 29 Apr 2022

Date Written: April 24, 2022


Using new census-type data and a dynamic structural model, we study the effect of credit supply on investment by manufacturing firms during the Greek depression. Real factors (profitability, uncertainty, and taxes) account for only a fraction of the substantial drop in investment observed in the data. The reduction in credit supply has significant real effects, explaining 11--32% of the investment slump. We also find that exporting firms, which reduce investment and deleverage despite their improved profitability during the crisis, face a contraction in credit supply similar to that of non-exporters, suggesting that the credit-supply shock has a significant common component.

Keywords: credit supply, firm investment, financial crises, Greek depression

JEL Classification: G01, G31, D22, E44

Suggested Citation

Fakos, Alexandros and Sakellaris, Plutarchos and Tavares, Tiago, Investment Slumps During Financial Crises: The Real Effects of Credit Supply (April 24, 2022). Journal of Financial Economics (JFE), Volume 145, Issue 1, July 2022, Pages 29-44, Available at SSRN: or

Alexandros Fakos (Contact Author)

ITAM ( email )

Av. Camino a Santa Teresa 930
Colonia Heroes de Padierna
Mexico City, CDMX 10700


Plutarchos Sakellaris

Athens University of Economics and Business ( email )

76 Patission Street
Athens, 104 34
+302108203304 (Phone)
+3012108203383 (Fax)

Tiago Tavares

ITAM ( email )

Camino a Santa Teresa No. 930
Col. Héroes de Padierna
Ciudad de México

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