The 2014 Russia Shock and Its Effects on Italian Firms and Banks / Stefano Federico, Giuseppe Marinelli, Francesco Palazzo.

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Federico, Stefano

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Material type: Text

TextSeries: Working Paper Series (National Bureau of Economic Research) ; no. w31171.Publication details: Cambridge, Mass. National Bureau of Economic Research 2023.Description: 1 online resource: illustrations (black and white)Subject(s):

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Abstract: We study how a demand shock in an export market propagates to the exporting country's banking system. Using the dual shocks of sanctions and falling oil prices suffered by Russia in 2014, we investigate the effects on Italian firms and banks more exposed to the Russian market. This event implied a sharp decline in sales for firms with a significant share of sales to Russia, but it did not affect the overall amount of credit available to them. Banks relatively more exposed to Italian exporters to Russia cut their overall credit supply, especially vis-à-vis ex ante risky borrowers, but continued to provide credit towards firms moderately hit by the trade shock, in an attempt to let them cope with the liquidity shortfall. Our results suggest that banks mitigate trade shocks for certain hit firms, while at the same time propagate them to other firms not directly affected by the shock.

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Item type	Home library	Collection	Call number	Status	Date due	Barcode	Item holds
Working Paper	Biblioteca Digital	Colección NBER	nber w31171 (Browse shelf(Opens below))	Not For Loan

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April 2023.

We study how a demand shock in an export market propagates to the exporting country's banking system. Using the dual shocks of sanctions and falling oil prices suffered by Russia in 2014, we investigate the effects on Italian firms and banks more exposed to the Russian market. This event implied a sharp decline in sales for firms with a significant share of sales to Russia, but it did not affect the overall amount of credit available to them. Banks relatively more exposed to Italian exporters to Russia cut their overall credit supply, especially vis-à-vis ex ante risky borrowers, but continued to provide credit towards firms moderately hit by the trade shock, in an attempt to let them cope with the liquidity shortfall. Our results suggest that banks mitigate trade shocks for certain hit firms, while at the same time propagate them to other firms not directly affected by the shock.