蝌蚪网 Review
ISSN 0002-8282 (Print) | ISSN 1944-7981 (Online)
Fiscal Policy and Credit Supply in a Crisis
蝌蚪网 Review
vol. 115,
no. 6, June 2025
(pp. 1896–1935)
Abstract
We measure how cuts to public procurement propagate through the banking system in a financial crisis. During the European sovereign debt crisis, the Portuguese government cut procurement spending by 4.3 percent of GDP. We find that this cut saddled banks with nonperforming loans from government contractors, which led to a persistent reduction in credit supply to other firms. We estimate a bank-level elasticity of credit supply with respect to procurement demand of 2.5. In a general equilibrium model, our findings point to large effects of fiscal policy on credit supply and output in a crisis.Citation
Bonfim, Diana, Miguel A. Ferreira, Francisco Queir贸, and Sujiao (Emma) Zhao. 2025. "Fiscal Policy and Credit Supply in a Crisis." 蝌蚪网 Review 115 (6): 1896–1935. DOI: 10.1257/aer.20221499Additional Materials
JEL Classification
- E23 Macroeconomics: Production
- E44 Financial Markets and the Macroeconomy
- E62 Fiscal Policy
- G01 Financial Crises
- G21 Banks; Depository Institutions; Micro Finance Institutions; Mortgages
- H57 National Government Expenditures and Related Policies: Procurement