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Are Real Effects of Credit Supply Overestimated? Bias from Firms' Current Situation and Future Expectations

Author

Listed:
  • Michael Kleemann
  • Manuel Wiegand

Abstract

This paper advocates for incorporating timely measures of firms' current situation and future expectations when disentangling real effects of credit supply from demand-side factors. Identification of supply-side effects in firm-level analyses often relies on balance sheet variables to control for firm heterogeneity. While balance sheets mirror past business, bias from contemporaneous and forward-looking firm-side factors may persist. Using German firm-level survey data from 2003 to 2011, we show that controlling for firms' current situation and future expectations reduces upward bias in estimated credit supply-side effects on firm-level production. This is particularly important when market data is unavailable for firms.

Suggested Citation

  • Michael Kleemann & Manuel Wiegand, 2014. "Are Real Effects of Credit Supply Overestimated? Bias from Firms' Current Situation and Future Expectations," ifo Working Paper Series 192, ifo Institute - Leibniz Institute for Economic Research at the University of Munich.
  • Handle: RePEc:ces:ifowps:_192
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    File URL: https://www.cesifo-group.de/DocDL/IfoWorkingPaper-192.pdf
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    References listed on IDEAS

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    Cited by:

    1. Balleer, Almut & Hristov, Nikolay & Menno, Dominik, 2017. "Financial Constraints and Nominal Price Rigidities," CEPR Discussion Papers 11790, C.E.P.R. Discussion Papers.
    2. Sebastian Link, 2018. "Harmonization and Interpretation of the ifo Business Survey's Micro Data," CESifo Working Paper Series 7427, CESifo Group Munich.
    3. Christian Seiler, 2014. "Mode Preferences in Business Surveys: Evidence from Germany," ifo Working Paper Series 193, ifo Institute - Leibniz Institute for Economic Research at the University of Munich.
    4. Almut Balleer & Nikolay Hristov & Dominik Menno, 2017. "Financial Constraints and Nominal Price Rigidities," CESifo Working Paper Series 6309, CESifo Group Munich.

    More about this item

    Keywords

    Credit constraints; production; employment; matching estimator;

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • E23 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Production
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance

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