Global crisis

Fabrizio Coricelli, Marco Frigerio, 23 February 2017

A main source of alternative financing during credit crunches is trade credit. This column argues that small and medium-sized enterprises in Europe suffered a liquidity squeeze during the Great Recession due to the increase of their net lending to large firms. This squeeze was induced by their weak bargaining power in trade credit relationships, and had significant adverse effects on their levels of investment and employment.

Marco Onado, 21 February 2017

European banks have not recovered from the Global Crisis, in part due to heavy provisions for non-performing loans. This column argues that a comprehensive approach to the issue in Europe could address market inefficiencies and reduce bad loans to bearable levels. The establishment of a European scheme to securitise non-performing loans should form one of the next steps towards recovery.

Fabio Berton, Sauro Mocetti, Andrea Presbitero, Matteo Richiardi, 09 February 2017

Understanding the real effects of financial shocks is essential for the design of effective growth-restoring policies. This column uses data on job contracts matched with the universe of firms and their banks from a region of Italy to analyse the employment effects of financial shocks. Financially constrained firms – especially the least productive ones – significantly reduced employment, mostly of less-educated and lower-skilled workers with temporary contracts. While these results suggest possible distributional effects across workers, they could also reflect a productivity-enhancing reallocation function of financial shocks.

Biswajit Banerjee, Fabrizio Coricelli, 08 February 2017

Financial markets and the banking sectors in several European countries are still struggling to recover from the Global crisis, with many instances of unresolved problems involving bad loans and fragility of banks. This column introduces a new CEPR eBook, drawing on research presented at the first conference of the European Central Banking Network, which examines the relationship between credit booms and busts and the potential misallocation of resources. Improving the functioning of credit markets and their ability to improve the allocation of resources is crucial to lift Europe out of the phase of low growth that has followed the Global Crisis.

David Marques-Ibanez, Michiel van Leuvensteijn, 03 February 2017

An unprecedented process of deregulation took place in the banking sector in the three decades prior to the Global Crisis. This column argues that during periods of intense bank competition, financial innovation can compound the adverse effects of competition on stability. Coupled with strong competition, the significant use of one such innovation – securitisation – in the run-up to the crisis was related to high levels of bank risk.

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