Credit Supply and Productivity Growth

91 Pages Posted: 17 Apr 2018

See all articles by Francesco Manaresi

Francesco Manaresi

Organization for Economic Co-Operation and Development (OECD)

Nicola Pierri

Stanford University

Multiple version iconThere are 3 versions of this paper

Date Written: March 28, 2018

Abstract

We study the impact of bank credit supply on firm output and productivity. By exploiting a matched firm-bank database which covers all the credit relationships of Italian corporations over more than a decade, we measure idiosyncratic supply-side shocks to firms' credit availability. We use our data to estimate a production model augmented with financial frictions and show that an expansion in credit supply leads firms to increase both their inputs and their output (value added and revenues) for a given level of inputs. Our estimates imply that a credit crunch will be followed by a productivity slowdown, as experienced by most OECD countries after the Great Recession. Quantitatively, the credit contraction between 2007 and 2009 could account for about a quarter of the observed decline in Italy's total factor productivity growth. The results are robust to an alternative measurement of credit supply shocks that uses the 2007-08 interbank market freeze as a natural experiment to control for assortative matching between borrowers and lenders. Finally, we investigate possible channels: access to credit fosters IT-adoption, innovation, exporting, and the adoption of superior management practices.

Keywords: credit supply, productivity, export, management, it adoption

JEL Classification: D22, D24, G21

Suggested Citation

Manaresi, Francesco and Pierri, Nicola, Credit Supply and Productivity Growth (March 28, 2018). Bank of Italy Temi di Discussione (Working Paper) No. 1168, Available at SSRN: https://ssrn.com/abstract=3160605 or http://dx.doi.org/10.2139/ssrn.3160605

Francesco Manaresi (Contact Author)

Organization for Economic Co-Operation and Development (OECD) ( email )

2 rue Andre Pascal
Paris Cedex 16, 75775
France

Nicola Pierri

Stanford University ( email )

Stanford, CA 94305
United States

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