The Real Effects of Credit Supply: Review, Synthesis, and Future Directions
47 Pages Posted: 15 Oct 2019 Last revised: 6 Dec 2019
Date Written: October 1, 2019
This paper reviews the rapidly growing literature on the real effects of bank credit supply fluctuations and identifies several worthwhile avenues for future research. In terms of the transmission of credit supply shocks into real effects, we suggest to further investigate the roles of (i) private borrower information, (ii) employment protection legislation, (iii) corporate governance, (iv) bank specialization, and (v) alternative financing sources. We also call for additional analyses of how these shocks affect (vi) investment efficiency, (vii) market structure, (viii) the allocation of human capital, as well as (ix) how their effects can be propagated through the production network. Finally, we emphasize the need for more evidence on (x) the persistency, (xi) asymmetry, and (xii) heterogeneity of resulting outcomes.
Keywords: Credit Supply, Bank Health, Real Effects
JEL Classification: E22, E24, E50, G21
Suggested Citation: Suggested Citation