Don't stop me now: The impact of credit market fragmentation on firms' financing constraints

Arbeitspapier

This paper investigates how the withdrawal of banks from their cross-border business impacted the borrowing costs of European firms since the crisis. We combine aggregate information on total and cross-border credit with firm-level survey data for the period 2010 - 2014. We find that the decline in cross-border lending led to a deterioration in the borrowing conditions of small firms. In countries with more pronounced reductions in cross-border credit inflows, the likelihood of a rise in firms' external financing costs has increased. This result is mainly driven by the interbank channel, which plays a crucial role in transmitting shocks to the real sector across borders.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: DIW Discussion Papers ; No. 1650

Classification and Topics

• Classification: Wirtschaft ; International Lending and Debt Problems ; Financial Aspects of Economic Integration ; International Financial Markets ; Banks; Depository Institutions; Micro Finance Institutions; Mortgages
• Subject: international banking ; firm finance ; credit constraints

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Bremus, Franziska ; Neugebauer, Katja
• Event: Veröffentlichung
• (who): Deutsches Institut für Wirtschaftsforschung (DIW)
• (where): Berlin
• (when): 2017

Further information

• Handle: http://hdl.handle.net/10419/156142
• Last update: 10.03.2025, 11:42 AM CET