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  • Jakovljevic - JFI 2019 Accepted Manuscript

    Rights statement: This is the author’s version of a work that was accepted for publication in Journal of Financial Intermediation. Changes resulting from the publishing process, such as peer review, editing, corrections, structural formatting, and other quality control mechanisms may not be reflected in this document. Changes may have been made to this work since it was submitted for publication. A definitive version was subsequently published in Journal of Financial Intermediation, ?, ?, 2019 DOI: 10.1016/j.jfi.2019.01.004

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    Embargo ends: 10/10/20

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Identifying credit supply shocks with bank-firm data: Methods and applications

Research output: Contribution to journalJournal article

E-pub ahead of print
<mark>Journal publication date</mark>10/04/2019
<mark>Journal</mark>Journal of Financial Intermediation
Publication statusE-pub ahead of print
Early online date10/04/19
Original languageEnglish


Current empirical methods to identify and assess the impact of bank credit supply shocks rely strictly on multi-bank firms and ignore firms borrowing from only one bank. Yet, these single-bank firms are often the majority of firms in an economy and most prone to credit supply shocks. We propose and underpin an alternative demand control (using industry–location–size–time fixed effects) that allows identifying time-varying cross-sectional bank credit supply shocks using both single- and multi-bank firms. Using matched bank-firm credit data from Belgium, we show that firms borrowing from banks with negative credit supply shocks exhibit lower financial debt growth, asset growth, investments, and operating margin growth. Positive credit supply shocks are associated with bank risk-taking behaviour at the extensive margin. Importantly, to capture these effects it is crucial to include the single-bank firms when identifying the bank credit supply shocks.