6533b7dafe1ef96bd126eca8

RESEARCH PRODUCT

Credit demand and supply shocks in Italy during the Great Recession

Fabio ParlaAndrea Cipollini

subject

Economics and Econometrics050208 financecredit shock05 social sciencesMonetary economicsR11Great recessionSupply and demandStructural VARregional economic activity0502 economics and businessEconomicsidentification through heteroscedasticity050207 economicsE51C32

description

In this article, we use Structural VAR analysis to disentangle credit demand and supply shocks and their effect on real economic activity in Italy during the 2008 to 2014 crisis period. The three endogenous variables considered are the loan interest rate, the loans growth rate and the employment to population ratio. The data are observed at annual frequency for each of 103 Italian provinces. The empirical evidence suggests that the variance of the shocks varies across four Italian macro-regions: North, Centre, South and Islands, and hece heteroscedasticity is used to identify (ex ante) the structural shocks. Sign restrictions are used to interpret shocks ex post. The empirical findings suggest a prominent role of credit supply shock in shaping real activity dynamics and also that credit crunch hits the North of Italy less than the remaining macro-regions, especially the South of Italy.

https://doi.org/10.1080/00036846.2018.1488066