Production and Financial Networks in Interplay

Kenan Huremović; Gabriel Jiménez; Enrique Moral-Benito; José-Luis Peydró; Fernando Vega-Redondo

doi:10.1257/aer.20201088

Production and Financial Networks in Interplay

Kenan Huremović¹; Gabriel Jiménez²; Enrique Moral-Benito²; José-Luis Peydró³; Fernando Vega-Redondo⁴

¹ IMT School for Advanced Studies Lucca (email: ) · ² Banco de España (email: ) · ³ LUISS University, EIEF, CEPR (email: ) · ⁴ Department of Economics, The Chinese University of Hong Kong (email: )

American Economic Review 2026

We show that bank shocks to firms propagate along the production network with stronger upstream than downstream effects. Our identification relies on (i) administrative datasets from Spain covering supplier-customer transactions and bank loans, (ii) bank credit supply shocks from the global financial crisis, and (iii) a general equilibrium model of a production network with financial frictions, estimated structurally. We find network propagation amplifies the impact of bank shocks on GDP growth by nearly 50 percent. Moreover, bank shocks to firms’ distant suppliers and customers contribute similarly to this aggregate effect as bank shocks to firms’ direct customers and suppliers. (JEL D22, D85, E23, G01, G21, G32, L14)

DOI: 10.1257/aer.20201088
Volume: 116 (5)
Pages: 1611-1647
Language: en
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