Search results for "G28 F21"

Growing Like Germany: Local Public Debt, Local Banks, Low Private Investment

2021

The paper uses a panel of more than 1m German firms over 2010-2016, to provide the first firm-bank level evidence of local crowding out for a developed economy characterized by low interest rates and fiscal austerity. Our mechanism relies on two structural features of Germany's banking landscape: the local segmentation of credit markets for small and medium-sized firms (SME) and the role of local public banks in local public finance. Local public banks dominate lending to small and medium firms in Germany and also have an explicit mandate to lend to the local public sector. With spreads on local government debt at all-time lows, local public banks tried to break even, using their market pow…