On the 15th May, Francisco Queiró (Nova SBE) will be at ISEG to present the study on "Fiscal Policy and Credit Supply: The Procurement Channel“.
The seminar will take place from 13:30 to 14.00 in the Novo Banco Lecture Theatre (Quelhas, 4th Floor).
Free admission.
Abstract:
We measure how cuts to public procurement propagate through the banking system in a financial crisis. During the European sovereign debt crisis, the Portuguese government cut procurement spending by 4.3% of GDP. We find that this cut saddled banks with non-performing loans from government contractors, which led to a persistent reduction in credit supply to other firms. To the extent that shocks to private and public spending propagate similarly, our estimates imply an elasticity of credit supply with respect to aggregate demand of 2.5. Our findings can help explain the protracted recovery of credit and output in Portugal.