Credit Conditions and Recoveries from Recessions Associated with Financial Crises

March 1, 2010

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Format: Chicago

Prakash Kannan. Credit Conditions and Recoveries from Recessions Associated with Financial Crises, (USA: International Monetary Fund, 2010) accessed December 22, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

Recoveries from recessions associated with a financial crisis tend to be sluggish. In this paper, we present evidence that stressed credit conditions are an important factor constraining the pace of recovery. In particular, using industry-level data, we find that industries relying more on external finance grow more slowly than other industries during recoveries from recessions associated with financial crises. Additional tests, based on establishment size, on alternative definitions of financial crises, and on corporate-government interest rate spreads, support the findings. Moreover, for subsets of industries where financial frictions are more severe, we find much stronger differential growth effects.

Subject: Bank credit, Banking crises, Business cycles, Credit, Financial crises

Keywords: Credit condition, Financial crisis episode, Recession episode, WP

Publication Details

Pages:

34
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2010/083
Stock No:

WPIEA2010083
ISBN:

9781451982657
ISSN:

1018-5941

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