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

Bremus, Franziska and Neugebauer, Katja (2017) Don't stop me now: the impact of credit market fragmentation on firms' financing constraints. SRC Discussion Paper, No. 67. Systemic Risk Centre, The London School of Economics and Political Science, London, UK.

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Identification Number: No. 67

Abstract

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.

Item Type: Monograph (Discussion Paper)
Official URL: http://www.systemicrisk.ac.uk/
Additional Information: © 2017 The Authors
Subjects: H Social Sciences > HB Economic Theory
H Social Sciences > HG Finance
JEL classification: F - International Economics > F3 - International Finance > F34 - International Lending and Debt Problems
F - International Economics > F3 - International Finance > F36 - Financial Aspects of Economic Integration
G - Financial Economics > G1 - General Financial Markets > G15 - International Financial Markets
G - Financial Economics > G2 - Financial Institutions and Services > G21 - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
Sets: Research centres and groups > Systemic Risk Centre
Date Deposited: 24 Mar 2017 16:47
Last Modified: 24 Mar 2017 16:47
Projects: ES/K002309/1
Funders: Economic and Social Research Council
URI: http://eprints.lse.ac.uk/id/eprint/70774

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