Production and Financial Networks in Interplay: Crisis Evidence from Supplier-Customer and Credit Registers

57 Pages Posted: 22 Sep 2020

See all articles by José-Luis Peydró

José-Luis Peydró

Imperial College London; Centre for Economic Policy Research (CEPR); Universitat Pompeu Fabra - Faculty of Economic and Business Sciences

Gabriel Jiménez

Banco de España

Kenan Huremovic

IMT School for Advanced Studies Lucca

Enrique Moral-Benito

Banco de España; Universidad Carlos III de Madrid

Fernando Vega-Redondo

Bocconi University

Date Written: September 1, 2020

Abstract

We show that bank shocks originating in the financial sector propagate upstream and downstream along the production network and triple the impact of direct bank shocks. Our identification relies on the universe of both supplier-customer transactions and bank loans in Spain, a standard operationalization of credit-supply shocks during the 2008-09 global crisis, and the proposed theoretical framework. The impact on real effects is strong, and similarly so, when considering: (i) direct bank shocks to firms versus first-order interim contagion; (ii) first-order versus higher-order network effects; (iii) downstream versus upstream propagation; (iv) firm-specific versus economy-wide shocks. Market concentration amplifies these effects.

Keywords: credit supply, networks, real effects of finance, shock propagation, Supply Chains

JEL Classification: D85, E44, E51, G01, G21

Suggested Citation

Peydro, Jose-Luis and Jimenez, Gabriel and Huremovic, Kenan and Moral-Benito, Enrique and Vega-Redondo, Fernando, Production and Financial Networks in Interplay: Crisis Evidence from Supplier-Customer and Credit Registers (September 1, 2020). CEPR Discussion Paper No. DP15277, Available at SSRN: https://ssrn.com/abstract=3696358

Jose-Luis Peydro (Contact Author)

Imperial College London ( email )

South Kensington Campus
Exhibition Road
London, Greater London SW7 2AZ
United Kingdom

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

Universitat Pompeu Fabra - Faculty of Economic and Business Sciences ( email )

Ramon Trias Fargas 25-27
Barcelona, Barcelona 08005
Spain
(+34) 93 542 1756 (Phone)
(+34) 93 542 1746 (Fax)

HOME PAGE: http://https://sites.google.com/site/joseluispeydroswebpage/

Gabriel Jimenez

Banco de España ( email )

Alcala 50
Madrid 28014
Spain

Kenan Huremovic

IMT School for Advanced Studies Lucca ( email )

Piazza S. Francesco 19
Lucca, IT-55100
Italy

Enrique Moral-Benito

Banco de España ( email )

Alcala 50
Madrid 28014
Spain

Universidad Carlos III de Madrid ( email )

CL. de Madrid 126
Madrid, Madrid 28903
Spain

Fernando Vega-Redondo

Bocconi University ( email )

Via Sarfatti, 25
Milan, MI 20136
Italy

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