Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/207288 
Year of Publication: 
2019
Series/Report no.: 
CESifo Working Paper No. 7897
Publisher: 
Center for Economic Studies and ifo Institute (CESifo), Munich
Abstract: 
Small businesses (SMEs) depend on banks for credit. We show that the severity of the Eurozone crisis was worse in countries where firms borrowed more from domestic banks (“domestic bank dependence”) than in countries where firms borrowed more from international banks. Eurozone banking integration in the years 2000–2008 mainly involved cross-border lending between banks while foreign banks’ lending to the real sector stayed flat. Hence, SMEs remained dependent on domestic banks and were vulnerable to global banking shocks. We confirm, using a calibrated quantitative model, that domestic bank dependence makes sectors and countries with many SMEs vulnerable to global banking shocks.
Subjects: 
small and medium enterprises
SME access to finance
banking integration
domestic bank dependence
international transmission
Eurozone crisis
JEL: 
F30
F36
F40
F45
Document Type: 
Working Paper
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