Abstract
This paper conducts the first empirical study of the bank balance sheet channel using data on discouraged and informally rejected firms, in addition to information on the formal loan-granting process, in eight economies that use the euro or are pegged to it over 2004-7. Consistent with previous studies, I find that lax monetary conditions increase bank credit in general and bank credit to ex ante risky firms in particular, especially for banks with lower capital ratios. Importantly, I find that the results are considerably stronger when data on informal credit constraints are incorporated.
Authors
- Alexander Popov
JEL codes
- E32
- E51
- E52
- F34
- G21