Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/175716 
Year of Publication: 
2017
Series/Report no.: 
ECB Working Paper No. 2092
Publisher: 
European Central Bank (ECB), Frankfurt a. M.
Abstract: 
The post-2008 period in the euro area was characterised by sharp dispersion in borrowing costs faced by firms, across both countries and firm types. This dispersion was an important manifestation of the financial fragmentation" which hampered the smooth transmission of accommodative monetary policy. Using bank level data from 2007 to 2015, we directly measure the borrowing cost dispersion across firm types by calculating the difference in the interest rate charged by the same bank in the same month for loans to small and large firms (the "Small Firm Financing Premium", SFFP). We assess the role played by both bank and macroeconomic factors in explaining the variation in the SFFP across countries and through time. We provide evidence that bank market power, sovereign bond holdings and balance sheet weaknesses led to disproportionate borrowing cost increases for small firms, and exacerbated the impact of a weak macroeconomy during this period.
Subjects: 
SMEs
cost of credit
bank balance sheets
bank market power
JEL: 
G20
G21
E51
Persistent Identifier of the first edition: 
ISBN: 
978-92-899-2814-4
Document Type: 
Working Paper

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