The paper analyses the Italian credit market before and after the 2008-2013 double-dip recession to identify the role of the banking channel in the reduction of loans to small businesses in the first years of the recovery (2014-2017). The econometric analysis identifies the changes in loan supply distinctly for micro, small, medium and large companies, assuming different shocks for different types of customers borrowing from the same bank.
The results show that after the double-dip recession, bank supply policies have become more selective for all firms except the larger ones. More stringent credit standards for micro-enterprises have been applied mainly by larger banks and those with weaker balance sheets. These banks may have encountered greater difficulties in providing financing to firms with a significant degree of information opacity and with high fixed costs in relation to a low volume of operations.
