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The Real Effects of Credit Supply Shocks During the COVID-19 Pandemic

Author

Listed:
  • Alex Rivadeneira
  • Carlo Alcaraz
  • Nicolás Amoroso
  • Rodolfo Oviedo
  • Brenda Samaniego
  • Horacio Sapriza

Abstract

We study the real effects of credit supply shocks during the COVID-19 pandemic in Mexico. To this end, we merge administrative micro-level data on the universe of bank loans to firms with matched employer-employee social security records. For each firm, we measure its exposure to time-varying credit supply shocks. We find that a negative credit shock of one standard deviation would have increased a firm's exit probability by 0.15 percentage points (pp) and decreased its annual employment growth by 1 pp. These effects were most pronounced among unincorporated businesses, small and young firms, and those in non-essential sectors. Negative credit supply shocks led to higher separation rates for workers with low layoff costs, like those with low tenure or temporary contracts.

Suggested Citation

  • Alex Rivadeneira & Carlo Alcaraz & Nicolás Amoroso & Rodolfo Oviedo & Brenda Samaniego & Horacio Sapriza, 2024. "The Real Effects of Credit Supply Shocks During the COVID-19 Pandemic," Working Papers 2024-16, Banco de México.
    • Handle: RePEc:bdm:wpaper:2024-16
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    References listed on IDEAS

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    More about this item

    Keywords

    Banks; credit supply shocks; employment;
    All these keywords.

    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • 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

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