Journal of Financial Economics Vol. 145 No. 1 2022
Investment slumps during financial crises: The real effects of credit supply
Abstract
Using new census-type data and a dynamic structural model, we study the effect of credit supply on investment by manufacturing firms during the Greek depression. Real factors (profitability, uncertainty, and taxes) account for only a fraction of the substantial drop in investment observed in the data. The reduction in credit supply has significant real effects, explaining 11–32% of the investment slump. We also find that exporting firms, which reduce investment and deleverage despite their improved profitability during the crisis, face a contraction in credit supply similar to that of non-exporters, suggesting that the credit-supply shock has a significant common component.
- DOI
- 10.1016/j.jfineco.2022.04.004
- Volume
- 145
- Issue
- 1
- Pages
- 29-44
- Language
- en
- Sources
- bibtex:phds-export.bib openalex crossref