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Bank Liquidity, Credit Supply, and the Environment

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  • Ross Levine
  • Chen Lin
  • Zigan Wang
  • Wensi Xie

Abstract

We evaluate the impact of the credit conditions facing corporations on their emissions of toxic air pollutants. Exploiting cross-county, cross-time shale discoveries that generated liquidity windfalls at local bank branches, we construct measures of (1) the degree to which banks in non-shale counties, i.e., counties where shale was not discovered, receive liquidity shocks through their branches in shale counties and (2) the degree to which a corporation in a non-shale county has a relationship lender that receives liquidity shocks through its branches. From both the county- and firm-level analyses, we discover that positive shocks to credit conditions reduce corporate pollution.

Suggested Citation

  • Ross Levine & Chen Lin & Zigan Wang & Wensi Xie, 2018. "Bank Liquidity, Credit Supply, and the Environment," NBER Working Papers 24375, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:24375
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    References listed on IDEAS

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    Cited by:

    1. de Haas, Ralph & Popov, A., 2018. "Financial Development and Industrial Pollution," Other publications TiSEM a0a4fb82-734a-442a-9ea1-a, Tilburg University, School of Economics and Management.
    2. Itzhak Ben-David & Stefanie Kleimeier & Michael Viehs, 2018. "Exporting Pollution: Where Do Multinational Firms Emit CO₂?," NBER Working Papers 25063, National Bureau of Economic Research, Inc.
    3. Drudi, Francesco & Moench, Emanuel & Holthausen, Cornelia & Weber, Pierre-François & Ferrucci, Gianluigi & Setzer, Ralph & Adao, Bernardino & Dées, Stéphane & Alogoskoufis, Spyros & Téllez, Mar Delgad, 2021. "Climate change and monetary policy in the euro area," Occasional Paper Series 271, European Central Bank.
    4. Littke, Helge C. N. & Ossandon Busch, Matias, 2018. "Banks fearing the drought? Liquidity hoarding as a response to idiosyncratic interbank funding dry-ups," IWH Discussion Papers 12/2018, Halle Institute for Economic Research (IWH).
    5. Littke, Helge C. N., 2018. "Channeling the Iron Ore Super-Cycle: The role of regional bank branch networks in emerging markets," IWH Discussion Papers 11/2018, Halle Institute for Economic Research (IWH).
    6. Littke, Helge C.N. & Ossandon Busch, Matias, 2021. "Banks fearing the drought? Liquidity hoarding as a response to idiosyncratic interbank funding dry-ups," Journal of International Money and Finance, Elsevier, vol. 119(C).

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    More about this item

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • Q40 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - General
    • Q52 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Pollution Control Adoption and Costs; Distributional Effects; Employment Effects
    • Q53 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Air Pollution; Water Pollution; Noise; Hazardous Waste; Solid Waste; Recycling

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