Burning Money? Government Lending in a Credit Crunch

• Gabriel Jiménez ^[2] ; José-Luis Peydró ^[1] ; Rafael Repullo ^[3] ; Jesús Saurina ^[2]
  1. [1] Universitat Pompeu Fabra

     Universitat Pompeu Fabra

     Barcelona, España

     
  2. [2] Banco de España
  3. [3] CEMFI

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• Localización: Documentos de Trabajo ( CEMFI ), Nº. 12 (CEMFI Working Paper No. 1812, October 2018), 2018
• Idioma: inglés
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• Resumen

  • We analyze a small, new credit facility of a Spanish state-owned-bank during the crisis, using its continuous credit scoring system, firm-level scores, and credit register data. Compared to privatelyowned banks, the state-owned bank faces worse applicants, softens (tightens) its credit supply to unobserved (observable) riskier firms, and has much higher defaults. In a regression discontinuity design, the supply of public credit causes: large positive real effects to financially-constrained firms (whose relationship banks reduced substantially credit supply); crowding-in of new private-bank credit; and positive spillovers to other firms. Private returns of the credit facility are negative, while social returns are positive.