Hostname: page-component-cd9895bd7-gxg78 Total loading time: 0 Render date: 2024-12-28T04:38:52.496Z Has data issue: false hasContentIssue false
  • English
  • Français

SME Financing Conditions in Europe: Credit Crunch or Fundamentals?

Published online by Cambridge University Press:  26 March 2020

Sarah Holton ,
Martina Lawless  and
Fergal McCann
Fergal McCann*
Affiliation:
Central Bank of Ireland
*
E-mail: [email protected].
Get access Rights & Permissions [Opens in a new window]

Abstract

Cross-country divergence in credit availability to Small and Medium Enterprises (SMEs) has been a salient feature of the recent Euro Area economic crisis. This paper uses firm level and macroeconomic data to identify heterogeneity in SME credit conditions within the Euro Area since 2009. By taking account of differences in firm quality and in the risk-free interest rate, we use remaining residual differences in credit supply conditions to identify a ‘credit crunch’. We investigate whether macroeconomic conditions such as real economy growth and private sector leverage can explain these residual credit crunches, finding that banks respond to these factors when allocating credit to SMEs. The analysis allows identification of economies where credit conditions appear both unexpectedly restrictive and accommodative.

Keywords

credit supplycredit demandeconomic crisisdebt overhangG01G21
Type
Research Articles
Information
National Institute Economic Review , Volume 225 , August 2013 , pp. R52 - R67
Copyright
Copyright © 2013 National Institute of Economic and Social Research

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

Footnotes

The views expressed in this paper are our own, and do not necessarily reflect the views of the Central Bank of Ireland or the ESCB.

References

Abiad, A., DellAriccia, G. and Li, B. (2011), ‘Creditless recoveries’, CEPR Discussion Paper no. 8301.Google Scholar
Albertazzi, U. and Marchetti, D.J. (2010), ‘Credit supply, flight to quality and ever-greening: an analysis of bank-firm relationships after Lehman’, Bank of Italy, Temi di discussione (Economic working paper) no. 756.Google Scholar
Bernanke, B.S. and Gertler, M. (1995), ‘Inside the black box: the credit channel of monetary policy transmission’, The Journal of Economic Perspectives, 9 (4), pp. 27–48.CrossRefGoogle Scholar
Bernanke, B.S. and Lown, C.S. (1991), ‘The credit crunch’, Brookings Papers on Economic Activity, 22 (2), pp. 205–48.Google Scholar
Campello, M., Graham, J.R. and Harvey, C.R. (2010), ‘The real effects of financial constraints: evidence from a financial crisis’, Journal of Financial Economics, 97 (3), pp. 470–87.CrossRefGoogle Scholar
Coeure, B. (2012), ‘Challenges to the single monetary policy and the ECB's response’, speech given at European Central Bank.Google Scholar
Draghi, M. (2012), ‘The monetary policy of the European Central Bank and its transmission in the Euro Area’, speech given at European Central Bank.Google Scholar
Gonzalez-Paramo, J.M. (2011), ‘The ECB's monetary policy during the crisis’, speech given at European Central Bank.Google Scholar
Holton, S., Lawless, M. and McCann, F. (2012), ‘Firm credit in Europe: a tale of three crises’, Research Technical Papers 04/RT/12, Central Bank of Ireland.Google Scholar
Jiménez, G., Ongena, S., Peydró, J. and Saurina, J. (2012), ‘Credit supply versus demand: bank and firm balance-sheet channels in good and crisis times’, Discussion paper 2012–005, Tilburg University, Center for Economic Research.CrossRefGoogle Scholar
Jorda, O., Schularick, M.H. and Taylor, A.M. (2011), ‘When credit bites back: leverage, business cycles, and crises’, NBER Working Paper No. 17621.Google Scholar
Mach, T.L. and Wolken, J.D. (2011), ‘Examining the impact of credit access on small firm survivability’, Finance and Economics Discussion Series 2011–35, Board of Governors of the Federal Reserve System.CrossRefGoogle Scholar
Mishkin, F.S. (1996), ‘The channels of monetary transmission: lessons for monetary policy’, NBER Working Paper No. 5464.Google Scholar
Rottmann, H. and Wollmershauser, T. (2013), ‘A micro data approach to the identification of credit crunches’, Applied Economics, 45 (17), pp. 2423–41.CrossRefGoogle Scholar