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SME Credit Constraints and Macroeconomic Effects

  • Gerlach, Petra
  • O'Connell, Brian
  • O'Toole, Conor

This research attempts to answer two particular questions: a) what factors drive SME credit constraints in the Irish economy and b) what is the impact of such constraints on the macro-economy, in particular on employment and investment. We find that constraints decrease with firm size while there is variation by sector. Our results indicate that firms applying to foreign-owned banks are more likely to be constrained. We also identify a direct effect of debt overhang on access to credit. Linking constraints to the macro-economy, we find a negative and significant effect of SME credit constraints on employment, while no effect is evident on firm investment.

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Paper provided by Economic and Social Research Institute (ESRI) in its series Papers with number WP467.

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Date of creation: Oct 2013
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Handle: RePEc:esr:wpaper:wp467
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