No. 1029 - Cross-elasticities in credit markets
Credit relationships between a bank and a firm are influenced by the relationships that the bank maintains with other firms and that the firm maintains with other banks. Ignoring the role of these interdependencies may lead to distortions in estimating the effects caused by financial shocks on the supply of credit to firms. The paper updates an estimation methodology recently proposed by the same authors (based on numerical simulations and data from the Italian Credit Register) to account for the role of interdependencies.
The analysis confirms how neglecting interdependencies in the credit market can distort the estimation of the effects of financial shocks on the supply of loans to firms. Furthermore, it shows that credit granted by multiple banks to the same firm is complementary during recessions but substitutable in other phases of the cycle. By contrast, the correlation between credit granted to different firms by the same bank is largely independent of the business cycle.
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17 June 2026
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