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Informal loans, liquidity constraints and local credit supply: evidence from Italy

Author

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  • Michele Benvenuti

    (Bank of Italy)

  • Luca Casolaro

    (Bank of Italy)

  • Emanuele Ciani

    (Bank of Italy
    University of Modena and Reggio Emilia)

Abstract

Using data from the Italian Survey on Household Income and Wealth from 1995 to 2014, we study the relation between informal credit (loans from relatives and friends) and a household’s access to bank credit. While most of the literature has focused on the substitutability channel, we highlight that even households with full access to the formal credit market are more likely to be indebted to relatives or friends when compared to those not interested in formal loans. This complementarity is stronger for households who have problems paying back their loans, suggesting the family and friends can act as lenders of last resort in the case of distress. Finally, we estimate the overall impact of an expansion of local credit supply on the diffusion of informal loans, using an IV approach. The results suggest that the complementarity effect prevails, but the positive effect on informal loans is economically very small.

Suggested Citation

  • Michele Benvenuti & Luca Casolaro & Emanuele Ciani, 2022. "Informal loans, liquidity constraints and local credit supply: evidence from Italy," Review of Economics of the Household, Springer, vol. 20(4), pages 1429-1461, December.
    • Handle: RePEc:kap:reveho:v:20:y:2022:i:4:d:10.1007_s11150-021-09567-6
    DOI: 10.1007/s11150-021-09567-6
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    Cited by:

    1. Zanin, Luca, 2018. "Private monetary transfers between households: Who is helped and by whom?," Journal of Behavioral and Experimental Finance, Elsevier, vol. 17(C), pages 76-82.
    2. Francisco Fernández López, 2017. "Impacto de la informalidad laboral sobre el acceso a crédito formal," Coyuntura Económica, Fedesarrollo, vol. 47(1 y 2), pages 169-204, December.
    3. Yin, Zhichao & Wang, Rui & Wu, Xi, 2023. "Financial inclusion, natural disasters and energy poverty: Evidence from China," Energy Economics, Elsevier, vol. 126(C).

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    More about this item

    Keywords

    Informal credit; Local credit markets; Inter vivos transfers;
    All these keywords.

    JEL classification:

    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth

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