Credit Demand and Supply Shocks in Italy During the Great Recession

24 Pages Posted: 2 Jul 2018

See all articles by Andrea Cipollini

Andrea Cipollini

University of Palermo - d/SEAS; Università degli studi di Modena e Reggio Emilia (UNIMORE) - Faculty of Business and Economics; Università degli studi di Modena e Reggio Emilia (UNIMORE) - Center for Research in Banking and Finance (CEFIN)

Fabio Parla

University of Palermo - d/SEAS

Date Written: July 2, 2018

Abstract

In this paper, we use Structural VAR analysis to disentangle credit demand and supply shocks and their eFFect on real economic activity in Italy during the 2008-2014 crisis period. The three endogenous variables considered are the loan interest rate, the loans growth rate and the employment to population ratio. The data are observed at annual frequency for each of 103 Italian provinces. The structural shocks are identified through heteroscedasticity, by letting the variance of the shocks to switch across four Italian macro-regions: North, Centre, South and Islands. Sign restrictions are used to interpret ex post the structural shocks. The empirical findings suggest a more important role of credit supply shocks in shaping the level of real economic activity. Furthermore, the results show that credit crunch hits the North of Italy less than the remaining macro-regions, especially the South-Italy.

Keywords: Structural VAR, Identi cation through heteroscedasticity, Credit shocks , Regional economic activity

Suggested Citation

Cipollini, Andrea and Parla, Fabio, Credit Demand and Supply Shocks in Italy During the Great Recession (July 2, 2018). d/SEAS Working Paper No. 18-5. Available at SSRN: https://ssrn.com/abstract=3206516 or http://dx.doi.org/10.2139/ssrn.3206516

Andrea Cipollini (Contact Author)

University of Palermo - d/SEAS ( email )

Viale delle Scienze, edificio 13
Palermo, 90124
Italy

Università degli studi di Modena e Reggio Emilia (UNIMORE) - Faculty of Business and Economics ( email )

Viale Berengario 51
41100 Modena, Modena 41100
Italy

Università degli studi di Modena e Reggio Emilia (UNIMORE) - Center for Research in Banking and Finance (CEFIN) ( email )

via Berengario 51
Modena, modena I-41100
Italy

Fabio Parla

University of Palermo - d/SEAS

Viale delle Scienze, edificio 13
Palermo, 90124
Italy

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