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When Credit Growth Diverges: Common Dynamics and Regional Heterogeneity in Italy

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  • Barbieri, Claudio
  • Guerini, Mattia
  • Napoletano, Mauro

Abstract

We investigate the structure and evolution of credit growth across Italian provinces. Using an econometric approach based on Random Matrix Theory, we decompose regional credit dynamics into common and idiosyncratic components. We use a longitudinal dataset of credit at the provincial level (NUTS-3 regions) covering the period 2000–2020 and document substantial heterogeneity in the synchronization of credit growth across local economies. Our results suggest that, while aggregate credit growth is largely driven by a strong common component, substantial heterogeneity emerges across disaggregated credit categories. Household mortgage lending displays strong and persistent co-movement across provinces, whereas corporate mortgages and unsecured credit are characterized by higher dispersion and relatively weaker common dynamics. Regional divergence intensifies sharply between 2010 and 2014, coinciding with the European sovereign debt crisis, suggesting a fragmentation of local credit supply and demand. Importantly, divergence does not display any clear geographical pattern, underscoring the role of nonspatial factors in shaping regional credit dynamics.

Suggested Citation

  • Barbieri, Claudio & Guerini, Mattia & Napoletano, Mauro, 2026. "When Credit Growth Diverges: Common Dynamics and Regional Heterogeneity in Italy," FEEM Working Papers 399465, Fondazione Eni Enrico Mattei (FEEM).
    • Handle: RePEc:ags:feemwp:399465
    DOI: 10.22004/ag.econ.399465
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    JEL classification:

    • C38 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Classification Methdos; Cluster Analysis; Principal Components; Factor Analysis
    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)

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