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Credit and Reсessions (Coricelli F., Roland I.)

Bank Lending

Abstract The paper develops a simple model on the asymmetric role of credit markets in output fluctuations. When credit markets are underdeveloped and enterprise activity is financed by trade credit, shocks may induce a break-up of credit and production chains, leading to sudden and sharp contractions. The development of a banking sector can reduce the probability of such collapses and hence plays a crucial role in softening output declines. However, the banking sector becomes a shock amplifier when shocks originate in the financial sector. Using industry-level data across a large cross-section of countries, we provide evidence in support of the model's predictions.
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Libref/ Coricelli F., Roland I. (2010) “Credit and Reсessions”, CES Working Papers, pp. 1-56
© Программирование — Александр Красильников, 2008
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