The paper investigates the role that social capital may play in mitigating the impact of an increase in uncertainty on banks' willingness to lend to firms. To develop proxies for both the demand and the supply of credit, the analysis exploits the increase in the level of uncertainty that followed the default of Lehman Brothers together with data obtained from the Credit Register.
Social capital mitigates the impact of a rise in uncertainty on credit supply, especially when informational asymmetries are greater. Policies that encourage the accumulation of social capital may therefore prove effective at making credit supply more resilient to uncertainty shocks, with positive effects on the real sector.
