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The TFP Channel of Credit Supply Shocks

Author

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  • Nadav Ben Zeev

    (Department of Economics, Ben-Gurion University of the Negev)

Abstract

Recent work stresses a potentially important relation between credit supply shocks and aggregate TFP based on factor misallocation. I take three steps to examine this relation. First, using state-of-the-art credit supply shock and aggregate TFP measures, I show that an adverse credit supply shock has a weak and very short-lived effect on aggregate TFP. Second, using firm-level data, I show that firm-level capital stock responses to an adverse credit supply shock produce an insignificant and negligible capital-misallocation–induced TFP response. Third, using employment data by fine firm-size category classification, I also find a negligible labor-misallocation–induced TFP response. These findings suggest that the TFP channel of credit supply shocks has a limited role in their transmission to the real economy.

Suggested Citation

  • Nadav Ben Zeev, 2023. "The TFP Channel of Credit Supply Shocks," The Review of Economics and Statistics, MIT Press, vol. 105(2), pages 425-441, March.
    • Handle: RePEc:tpr:restat:v:105:y:2023:i:2:p:425-441
    DOI: 10.1162/rest_a_01035
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