Small Firms and Domestic Bank Dependence in Europe's Great Recession

Arbeitspapier

Small businesses (SMEs) depend on banks for credit. We show that the severity of the Eurozone crisis was worse in countries where firms borrowed more from domestic banks (“domestic bank dependence”) than in countries where firms borrowed more from international banks. Eurozone banking integration in the years 2000–2008 mainly involved cross-border lending between banks while foreign banks’ lending to the real sector stayed flat. Hence, SMEs remained dependent on domestic banks and were vulnerable to global banking shocks. We confirm, using a calibrated quantitative model, that domestic bank dependence makes sectors and countries with many SMEs vulnerable to global banking shocks.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: CESifo Working Paper ; No. 7897

Classification and Topics

• Classification: Wirtschaft ; International Finance: General ; Financial Aspects of Economic Integration ; Macroeconomic Aspects of International Trade and Finance: General ; Macroeconomic Issues of Monetary Unions
• Subject: small and medium enterprises ; SME access to finance ; banking integration ; domestic bank dependence ; international transmission ; Eurozone crisis

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Hoffmann, Mathias ; Maslov, Egor ; Sørensen, Bent E.
• Event: Veröffentlichung
• (who): Center for Economic Studies and ifo Institute (CESifo)
• (where): Munich
• (when): 2019

Further information

• Handle: http://hdl.handle.net/10419/207288
• Last update: 10.03.2025, 11:42 AM CET