New Economics Papers
on Banking
Issue of 2013‒10‒18
24 papers chosen by
Christian Calmès, Université du Québec en Outaouais

  1. Shadow bank monitoring By Tobias Adrian; Adam B. Ashcraft; Nicola Cetorelli
  2. Market-Based Bank Capital Regulation By Bulow, Jeremy; Klemperer, Paul
  3. Price Versus Financial Stability: A role for money in Taylor rules? By John Keating; Lee Smith
  4. Predatory Short Selling By Markus K. Brunnermeier; Martin Oehmke
  5. 99.9% – really? By Kiema, Ilkka; Jokivuolle, Esa
  6. Promotion and Relegation between Country Risk Classes as Maintained by Country Risk Rating Agencies By Johannes Fedderke
  7. Sovereign ratings in the post-crisis world : an analysis of actual, shadow and relative risk ratings By Basu, Kaushik; De, Supriyo; Ratha, Dilip; Timmer, Hans
  8. Bank lending strategy, credit scoring and financial crises By Kleimeier S.; Dinh T.H.T.; Straetmans S.T.M.
  9. Banking in Transition Countries By John Bonin; Iftekhar Hasan; Paul Wachtel
  10. Central bank refinancing, interbank markets, and the hypothesis of liquidity hoarding: evidence from a euro-area banking system By Massimiliano Affinito
  11. Banks in international trade finance: evidence from the U.S. By Friederike Niepmann; Tim Schmidt-Eisenlohr
  12. Competition and Efficiency in the Mexican Banking Sector By Sara G. Castellanos; Jesus G. Garza-Garcia
  13. Transforming subsidiaries into branches - Should we be worrying about it? By Péter Fáykiss; Gabriella Grosz; Gábor Szigel
  14. Financial soundness indicators and financial crisis episodes By Maria Th. Kasselaki; Athanasios O. Tagkalakis
  15. The fragility of short-term secured funding markets By Antoine Martin; David Skeie; Ernst-Ludwig von Thadden
  16. Using credit reporting agency data to assess the link between the Community Reinvestment Act and consumer credit outcomes By Ana Patricia Muñoz; Kristin F. Butcher
  17. The recapitalization needs of European banks if a new financial crisis occurs By Eric Dor
  18. Federal Reserve tools for managing rates and reserves By Antoine Martin; James McAndrews; Ali Palida; David Skeie
  19. Estimating the impacts of restrictions on high LVR lending By Bloor, chris; McDonald, Chris
  20. The management of interest rate risk during the crisis: evidence from Italian banks By Lucia Esposito; Andrea Nobili; Tiziano Ropele
  21. Heterogeneity and stability: bolster the strong, not the weak By Dong Beom Choi
  22. What regulatory frameworks are more conducive to mobile banking ? empirical evidence from findex data By Gutierrez, Eva; Singh, Sandeep
  23. Debt collection agencies and the supply of consumer credit By Viktar Fedaseyeu
  24. Demand collapse or credit crunch to firms ? evidence from the world bank's financial crisis survey in Eastern Europe By Nguyen, Ha; Qian, Rong

  1. By: Tobias Adrian; Adam B. Ashcraft; Nicola Cetorelli
    Abstract: We provide a framework for monitoring the shadow banking system. The shadow banking system consists of a web of specialized financial institutions that conduct credit, maturity, and liquidity transformation without direct, explicit access to public backstops. The lack of such access to sources of government liquidity and credit backstops makes shadow banks inherently fragile. Shadow banking activities are often intertwined with core regulated institutions such as bank holding companies, security brokers and dealers, and insurance companies. These interconnections of shadow banks with other financial institutions create sources of systemic risk for the broader financial system. We describe elements of monitoring risks in the shadow banking system, including recent efforts by the Financial Stability Board.
    Keywords: Liquidity (Economics) ; Financial stability ; Intermediation (Finance) ; Financial institutions ; Systemic risk
    Date: 2013
  2. By: Bulow, Jeremy (Stanford University); Klemperer, Paul (University of Oxford)
    Abstract: Today's regulatory rules, especially the easily-manipulated measures of regulatory capital, have led to costly bank failures. We design a robust regulatory system such that (i) bank losses are credibly borne by the private sector (ii) systemically important institutions cannot collapse suddenly; (iii) bank investment is counter-cyclical; and (iv) regulatory actions depend upon market signals (because the simplicity and clarity of such rules prevents gaming by firms, and forbearance by regulators, as well as because of the efficiency role of prices). One key innovation is "ERNs" (equity recourse notes--superficially similar to, but importantly distinct from, "cocos") which gradually "bail in" equity when needed. Importantly, although our system uses market information, it does not rely on markets being "right".
    JEL: G10 G21 G28 G32
    Date: 2013–08
  3. By: John Keating (Department of Economics, The University of Kansas); Lee Smith (Department of Economics, The University of Kansas)
    Abstract: This paper analyzes optimal monetary policy in a standard New-Keynesian model augmented with a financial sector. The banks in the model are subject to shocks which impede their ability and willingness to produce financial assets. We show these financial market supply shocks decrease both the natural rates of output and interest. The implication is that an optimizing central bank with real time data on only inflation, output, interest rate spreads and monetary aggregates will respond positively to the growth rate of monetary aggregates which signal movement in the natural rate from these financial shocks. This simple rule is implementable by central banks as it makes the policy instrument a function of only observables and does not require precise knowledge of the model or the parameters. The key is the use of the Divisia monetary aggregate which provides a parameter- and estimation- free approximation to the the true monetary aggregate. We show policy rules reacting to the Divisia monetary aggregate have well-behaved determinacy properties - satisfying a novel Taylor principle for monetary aggregates. Finally, we conclude with a minimax robust policy prescription given the uncertainty surrounding parameters driving the financial and other structural shocks.
    Keywords: Monetary Aggregates, Optimal Monetary Policy, Taylor Rules, Financial Sector
    JEL: C43 E32 E41 E44 E51 E52 E58 E60
    Date: 2013–10
  4. By: Markus K. Brunnermeier; Martin Oehmke
    Abstract: Financial institutions may be vulnerable to predatory short selling. When the stock of a financial institution is shorted aggressively, leverage constraints imposed by short-term creditors can force the institution to liquidate long-term investments at fire sale prices. For financial institutions that are sufficiently close to their leverage constraints, predatory short selling equilibria co-exist with no-liquidation equilibria (the vulnerability region) or may even be the unique equilibrium outcome (the doomed region). Increased coordination among short sellers expands the doomed region, where liquidation is the unique equilibrium. Our model provides a potential justification for temporary restrictions on short selling of vulnerable institutions and can be used to assess recent empirical evidence on short-sale bans.
    JEL: G01 G20 G21 G23 G28
    Date: 2013–10
  5. By: Kiema, Ilkka (University of Helsinki); Jokivuolle, Esa (Bank of Finland Research)
    Abstract: The aim of the Internal Ratings Based Approach (IRBA) of Basel II was that capital suffices for unexpected losses with at least a 99.9% probability. However, because only a fraction of the required regulatory capital (a quarter to a half) had to be loss absorbing capital, the actual solvency probabilities may have been much lower, as the global financial crisis illustrates. Our estimates suggest that under Basel II IRBA the loss-absorbing capital of an average-quality portfolio bank suffices for unexpected losses with a 95%-99% probability. This translates into an expected bank failure rate as high as once in twenty years. Even if the bank's interest income is incorporated into our model, the expected failure rate is still substantial. We show that the expected failure rate increases with loan portfolio riskiness. Our calculations may be viewed as a measure of regulatory "self-delusion" included in Basel II capital requirements.
    Keywords: capital requirements; IRBA; Basel II; financial crisis
    JEL: G21 G28
    Date: 2013–10–09
  6. By: Johannes Fedderke
    Abstract: Credit rating agency assessments of sovereign risk bear weak statistical association with the quality of country policies. This paper demonstrates that where endogenous responses by policy makers to credit rating outcomes, and the degree of responsiveness of credit rating agencies to policy changes are accounted for, strong ssociations between policy quality and ratings should be present. The paper verifies these associations on panel data for 60 countries over the 1980-2013 period.
    Keywords: credit rating agencies, policies
    Date: 2013
  7. By: Basu, Kaushik; De, Supriyo; Ratha, Dilip; Timmer, Hans
    Abstract: This paper analyzes the evolution of sovereign credit ratings in the wake of the global financial crisis by studying changes in actual, shadow, and relative ratings between 2008 and 2012. For countries that do not have a rating from the major rating agencies, shadow ratings are estimated as a function of macroeconomic, structural, and governance variables. The shadow rating exercise confirms earlier findings in the literature that even after the financial crisis, many unrated countries appear to be more creditworthy than previously believed and can access international capital markets. The paper also develops a new rating scale called the"relative risk rating,"which ranks countries according to their actual or shadow ratings after controlling for changes in the world weighted average rating. When relative ratings in 2012 are compared with the first half of 2008, the world average rating is found to be weaker because of the financial crisis. The relative rating improved in developing economies such as Azerbaijan, Ethiopia, Kazakhstan, Indonesia, and the Philippines, whereas it deteriorated in crisis-affected high-income countries such as Cyprus, Greece, Spain, Portugal, Ireland, and Egypt. Interestingly, India, Jordan, Poland, and the United Kingdom had their rating outlook downgraded by the rating agencies, but their relative rating actually improved as other countries suffered even worse downgrades. A regression model is used to analyze the relative contributions of different variables to rating changes during 2008-2012, a helpful feature for policy makers interested in improving sovereign ratings.
    Keywords: Debt Markets,Emerging Markets,Banks&Banking Reform,Economic Theory&Research,Currencies and Exchange Rates
    Date: 2013–10–01
  8. By: Kleimeier S.; Dinh T.H.T.; Straetmans S.T.M. (GSBE)
    Abstract: Adverse selection inherent in the bank-borrower relationship typically intensifies during crises. This problem is expecially severe in emerging markets, characterized by weak institutions and banks with poorly developed monitoring and screening abilities. Exploiting a unique sample of Vietnamese loans, we show that by updating their credit scoring models banks can significantly improve their screening abilities. Our results suggest that a crisis fundamentally changes default patterns and that a model based on post-crisis data outperforms models based on pre-crisis data. We conclude that updating credit scoring models is a viable alternative to credit rationing for banks and, in combination with relationship lending, can lead to improved loan pricing, efficiency and profitability.
    Keywords: Financial Markets and the Macroeconomy; Banks; Depository Institutions; Micro Finance Institutions; Mortgages; Economic Development: Financial Markets; Saving and Capital Investment; Corporate Finance and Governance;
    JEL: E44 G21 O16
    Date: 2013
  9. By: John Bonin (Department of Economics, Wesleyan University); Iftekhar Hasan (Fordham University, 5 Columbus Circle, 11-22, New York, NY 10019); Paul Wachtel (Stern School of Business, New York University, New York NY 10012)
    Abstract: Modern banking institutions were virtually non-existent in the planned economies of central Europe and the former Soviet Union. In the early transition period, banking sectors began to develop during several years of macroeconomic decline and turbulence accompanied by repeated bank crises. However, governments in many transition countries learned from these tumultuous experiences and eventually dealt successfully with the accumulated bad loans and lack of strong bank regulation. In addition, rapid progress in bank privatization and consolidation took place in the late 1990s and early 2000s, usually with the participation of foreign banks. By the mid 2000s the banking sectors in many transition countries were dominated by foreign owners and were able to provide a wide range of services. Credit growth resumed, sometimes too rapidly, particularly in the form of lending to households. The global financial crisis put transition banking to test. Countries that had expanded credit rapidly were vulnerable to the macroeconomic shock and there was considerable concern that foreign owners would reduce their funding to transition country subsidiaries. However, the banking sectors turned out to be resilient, a strong indication of the rapid progress in institutional development and regulatory capabilities in the transition countries.
    Keywords: transition banking, bank privatization, foreign banks, bank regulation, credit growth
    Date: 2013–10
  10. By: Massimiliano Affinito (Bank of Italy)
    Abstract: This paper tests the hypothesis of liquidity hoarding in the Italian banking system during the 2007-2011 global financial crisis. According to this hypothesis, in periods of crisis, interbank markets stop working and central banks’ interventions are ineffective because banks hoard the liquidity injected rather than channelling it on to other banks and the real economy. The test uses monthly data at banking-group level for all intermediaries operating in Italy between January 1999 and August 2011. This is the first paper to use micro data to analyse the relationship between single banks’ positions vis-à-vis the central bank and the interbank market. The results show that the Italian interbank market functioned well even during the crisis, and, contrary to widespread conjecture, the liquidity injected by the Eurosystem was intermediated among banks and towards the real economy. This finding is robust to the use of several estimation methods and data on the different segments of the money market.
    Keywords: liquidity, financial crisis, central bank refinancing, interbank market
    JEL: G21 E52 C30
    Date: 2013–09
  11. By: Friederike Niepmann; Tim Schmidt-Eisenlohr
    Abstract: Banks play a critical role in facilitating international trade, in particular by reducing the risk of trade transactions. This paper uses unique information on the trade finance business of U.S. banks to document new empirical patterns. The data reveal that banks' trade finance claims differ substantially across destination countries. They are hump-shaped in country credit risk and increase with the time to import of a destination market. The extent to which trading partners use bank guarantees also varies systematically with global conditions, expanding when aggregate risk is higher and funding is cheaper. The response of bank trade finance to changes in these macro factors is heterogeneous, however. In countries with intermediate levels of credit risk, which rely the most on bank guarantees, bank trade finance adjusts the least. We show that a modification of the standard model of payment contract choice in international trade is needed to rationalize these empirical findings.
    Keywords: International trade ; Banks and banking, International ; Risk ; Credit
    Date: 2013
  12. By: Sara G. Castellanos; Jesus G. Garza-Garcia
    Abstract: The Mexican banking sector experienced a process of liberalization which aimed towards increasing the level of competition and efficiency. This paper studies the evolution of the efficiency of the Mexican banking sector from 2002 to 2012 and also analyses its relationship with the degree of banking competition. To do so, efficiency scores are estimated by applying the non-parametric methodology, Data Envelopment Analysis. Furthermore, the Boone Indicator is used to assess the degree of competition and included among other possible determinants of bank efficiency. The main results indicate increasing trends of efficiency in the banking sector during the period of study. Moreover, a direct relationship between banking competition and efficiency is observed. Besides, the capitalization index, market share and loan intensity increase efficiency whereas noninterest expenses and non performing loans decrease the level of efficiency. Lastly, in regards to the relative efficiency of local or foreign ownership of banks, it is found that the system’s average efficiency trend is observed among both local and foreign banks, but local banks are somewhat more efficient.
    Keywords: Panel Data, Bank Competition, Mexican Banking Sector, Boone Indicator
    JEL: D4 G15 G21 L11 N2
    Date: 2013–10
  13. By: Péter Fáykiss (Nemzetgazdasági Minisztérium); Gabriella Grosz (Magyar Nemzeti Bank (central bank of Hungary)); Gábor Szigel (Erste Bank)
    Abstract: In recent years, foreign banks’ presence in the form of branches instead of subsidiaries started to gain ground in most of the Central and Eastern European (CEE) countries, including Hungary. Due to the high share of foreign ownership in their banking systems, local authorities in CEE may perceive this trend towards the transformation of subsidiaries into branches as a loss of control over their financial systems. For the time being, we assess the financial stability risks related to this process to be rather moderate. First, no negative anomalies have been identified in respect of the existing branches in the Hungarian market, even though their market share is still small at this point. Furthermore, experience and our model results indicate that large universal banks, which constitute almost three quarters of the Hungarian market, are unlikely to switch to a branch model. Even though host country supervisors do not lose all responsibility for the regulation and supervision of branches, the use of certain regulatory instruments becomes more cumbersome or even impossible in certain cases. Thus, the spread of the branch model may increase the risk of contagion from parent banks in the host countries. Consequently, we think that the status quo appears to be the preferable option for the stability of the Hungarian banking system.
    Keywords: branch, regulation, organisational form, microprudential supervision, macroprudential supervision
    JEL: G21 G28 C21
    Date: 2013
  14. By: Maria Th. Kasselaki (Bank of Greece); Athanasios O. Tagkalakis (Bank of Greece)
    Abstract: This paper studies the links between of financial soundness indicators and financial crisis episodes controlling for several macroeconomic and fiscal variables in 20 OECD. We focus our attention on aggregate capital adequacy, asset quality and bank profitability indicators compiled by the IMF. Our key findings suggest that in times of severe financial crisis regulatory capital to risk weighted assets is increased (by about 0.5-0.6 percentage points –p.p.) to abide by regulatory and supervisory demands, non performing loans (NPL) to total loans increase dramatically (by about 0.5-0.6 p.p.), but loan loss provisions lag behind NPLs (they fall by about 12.3-18.8 p.p.) and profitability deteriorates dramatically (returns on assets (equity) fall by about 0.3-0.4 (5.0-7.0) p.p.).
    Keywords: Bank profitability; capital adequacy; asset quality; financial crisis.
    JEL: E44 E58 G21 G28 E61 E62 H61 H62 E32
    Date: 2013–05
  15. By: Antoine Martin; David Skeie; Ernst-Ludwig von Thadden
    Abstract: This paper develops a model of financial institutions that borrow short term and invest in long-term assets that can be traded in frictionless markets. Because these financial intermediaries perform maturity transformation, they are subject to potential runs. We derive distinct liquidity, collateral, and asset liquidation constraints, which determine whether a run can occur as a result of changing market expectations. We show that the extent to which borrowers can ward off an individual run depends on whether it has sufficient liquidity, collateral, and asset liquidation capacity. These determinants are endogenous and depend on the borrower's balance sheet, in terms of asset market exposure and leverage, and on fundamentals, such as productivity and size. Moreover, systemic runs are possible if shocks to the valuation of collateral held by outside investors are sufficiently strong and uniform, and if the system as a whole is exposed to high short-term funding risk.
    Keywords: Investment banking ; Repurchase agreements ; Financial crises ; Systemic risk
    Date: 2013
  16. By: Ana Patricia Muñoz; Kristin F. Butcher
    Abstract: We use a regression discontinuity design to investigate the effect of the Community Reinvestment Act on consumer credit outcomes using data from the Federal Reserve Bank of New York’s Consumer Credit Panel database (Equifax data) for the years 2004 to 2012. A bank’s activities in census tracts with median family incomes less than 80 percent of the metropolitan statistical area (MSA) median family income count toward a lending institution’s compliance with CRA rules. Assuming census tracts with median incomes at 79.9 percent of the MSA median are the same as census tracts at 80 percent—except for CRA eligibility—discontinuous changes in consumer credit outcomes at that threshold are evidence of the CRA’s impact. We find no statistically significant effects of the CRA on mortgages or foreclosures, either before or after the financial crisis. However, we do find evidence that CRA expanded broad measures of credit market activity: at the CRA threshold, there is a 9 percent increase in the total number of loans, an increase in the number of people covered by the Equifax data, and an increase in the fraction of individuals with a valid risk score. Despite expanded credit activity, which may increase consumers’ risk for adverse outcomes, there is no significant increase in delinquencies at the CRA threshold.
    Keywords: Community Reinvestment Act of 1977 ; Consumer credit
    Date: 2013
  17. By: Eric Dor (IESEG School of Management (LEM-CNRS))
    Abstract: This paper computes the total recapitalization needs of the banking sector of each European country in case of a new systemic financial crisis. These estimations are based on the estimated capital shortages of big individual banks published by the Volatility Laboratory of New York University Stern Business School and the Center for Risk Management of Lausanne.
    Date: 2013–10
  18. By: Antoine Martin; James McAndrews; Ali Palida; David Skeie
    Abstract: Monetary policy measures taken by the Federal Reserve as a response to the 2007-09 financial crisis and subsequent economic conditions led to a large increase in the level of outstanding reserves. The Federal Open Market Committee (FOMC) has a range of tools to control short-term market rates in this situation. We study several of these tools, namely, interest on excess reserves (IOER), reverse repurchase agreements (RRPs), and the term deposit facility (TDF). We find that overnight RRPs (ON RRPs) may provide a better floor on rates than term RRPs because they are available to absorb daily liquidity shocks. Whether the TDF or RRPs best support equilibrium rates depends on the intensity of interbank monitoring costs versus balance sheet costs, respectively, that banks face. In our model, using the RRP and TDF concurrently may most effectively stabilize short-term rates close to the IOER rate when such costs are rapidly increasing.
    Keywords: Federal Open Market Committee ; Monetary policy ; Bank reserves ; Bank liquidity ; Interest rates ; Repurchase agreements
    Date: 2013
  19. By: Bloor, chris; McDonald, Chris (Reserve Bank of New Zealand)
    Abstract: The Reserve Bank recently imposed a loan-to-value ratio limit governing bank lending on residential mortgages. This note outlines the analysis undertaken to estimate the likely impact of this limit on several macro-economically significant variables.
    Date: 2013–05
  20. By: Lucia Esposito (Bank of Italy); Andrea Nobili (Bank of Italy); Tiziano Ropele (Bank of Italy)
    Abstract: Changes in interest rates constitute a major source of risk for banks’ business activity and can diversely affect their financial conditions and performance. We use a unique dataset to analyse Italian banks’ exposure to interest rate risk during the crisis, relying on the standardized duration gap approach proposed by the Basel Committee. We provide evidence that banks managed their overall interest rate risk exposure by means of on-balance-sheet restructuring complemented by hedging with financial derivatives. But the complementary relationship between risk-management decisions differs significantly across banks. The different impact of a future increase in interest rates on banks’ economic value will be a matter of concern for policymakers when they return to a less accommodative monetary policy stance.
    Keywords: interest rate risk, derivatives, hedging, financial crisis
    JEL: E43 G21
    Date: 2013–09
  21. By: Dong Beom Choi
    Abstract: This paper provides a model of systemic panic among financial institutions with heterogeneous fragilities. Concerns about potential spillovers from each other generate strategic interaction among institutions, triggering a preemption game in which one tries to exit the market before the others to avoid spillovers. Although financial contagion originates in weaker institutions, systemic risk depends critically on the financial health of stronger institutions in the contagion chain. This analysis suggests that when concerns about spillovers prevail, then 1) increasing heterogeneity of institutions promotes systemic stability and 2) bolstering the strong institutions in the contagion chain, rather than the weak, more effectively enhances systemic stability.
    Keywords: Financial crises ; Systemic risk ; Investments ; Financial stability
    Date: 2013
  22. By: Gutierrez, Eva; Singh, Sandeep
    Abstract: Mobile banking services offer great potential to expand financial services, particularly payment services, to the poor. They also provide a convenient and cost effective way to access bank accounts. This paper constitutes a first attempt to explain statistically what factors contribute to mobile banking usage, with a particular focus on the regulatory framework. The authors construct an index that measures the existence of laws and regulation that support mobile banking activity for 35 countries. Using variations in regulatory environments across these countries and armed with newly released data on mobile banking usage by approximately 37,000 individuals in these 35 countries, the paper sheds light on the importance of laws and regulation in supporting mobile banking. The analysis finds that a supporting regulatory framework is associated with higher usage of mobile banking for the general population as well as for the unbanked.
    Keywords: Emerging Markets,Banks&Banking Reform,Fiscal&Monetary Policy,E-Finance and E-Security,E-Business
    Date: 2013–10–01
  23. By: Viktar Fedaseyeu
    Abstract: I examine contract enforcement in consumer credit markets by studying the role of third-party debt collectors. In order to identify the effect of debt collectors on credit supply, I construct a state-level index of the tightness of debt collection laws. I find that stricter regulations of third-party debt collectors are associated with a lower number of third-party debt collectors per capita and with fewer openings of revolving lines of credit. One additional restriction on debt collection activity reduces the number of debt collectors per capita by 15.9% of the sample mean and lowers the number of new revolving lines of credit by 2.2% of the sample mean. At the same time, regulations of third-party debt collectors do not affect secured consumer credit, which is consistent with the fact that debt collectors are used to enforce unsecured debt contracts. Stricter regulations of debt collectors decrease credit card recovery rates (by 9% of the sample mean for each additional restriction on debt collection activity), which appears to be the transmission mechanism by which debt collectors affect credit supply. The effect of debt collection laws is significant even when average credit scores are controlled for, meaning that consumer credit risk is not the only driver of credit access. My results can help explain the existence of a large market for unsecured consumer credit and shed light on contract enforcement in this market.
    Keywords: Finance, Personal ; Consumer credit ; Lender liability
    Date: 2013
  24. By: Nguyen, Ha; Qian, Rong
    Abstract: While there is a consensus that the 2008-2009 crisis was triggered by financial market disruptions in the United States, there is little agreement on whether the transmission of the crisis and the subsequent prolonged recession are due to credit factors or to a collapse of demand for goods and services. This paper assesses whether the primary effect of the global crisis on Eastern European firms took the form of an adverse demand shock or a credit crunch. Using a unique firm survey conducted by the World Bank in six Eastern European countries during the 2008-2009 financial crisis, the paper shows that the drop in demand for firms'products and services was overwhelmingly reported as the most damaging adverse effect of the crisis. Other"usual suspects,"such as rising debt or reduced access to credit, are reported as minor. The paper also finds that the changes in firms'sales and installed capacity are significantly and robustly correlated with the demand sensitivity of the sector in which the firms operate. However, they are not robustly correlated with various proxies for firms'credit needs.
    Keywords: Economic Theory&Research,Microfinance,Access to Finance,Markets and Market Access,Banks&Banking Reform
    Date: 2013–10–01

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