American Economic Review
ISSN 0002-8282 (Print) | ISSN 1944-7981 (Online)
Production and Financial Networks in Interplay
American Economic Review
(pp. 1611–47)
Abstract
We show that bank shocks to firms propagate along the production network with stronger upstream than downstream effects. Our identification relies on (i) administrative datasets from Spain covering supplier-customer transactions and bank loans, (ii) bank credit supply shocks from the global financial crisis, and (iii) a general equilibrium model of a production network with financial frictions, estimated structurally. We find network propagation amplifies the impact of bank shocks on GDP growth by nearly 50 percent. Moreover, bank shocks to firms' distant suppliers and customers contribute similarly to this aggregate effect as bank shocks to firms' direct customers and suppliers.Citation
Huremović, Kenan, Gabriel Jiménez, Enrique Moral-Benito, José-Luis Peydró, and Fernando Vega-Redondo. 2026. "Production and Financial Networks in Interplay." American Economic Review 116 (5): 1611–47. DOI: 10.1257/aer.20201088Additional Materials
JEL Classification
- D22 Firm Behavior: Empirical Analysis
- D85 Network Formation and Analysis: Theory
- E23 Macroeconomics: Production
- G01 Financial Crises
- G21 Banks; Depository Institutions; Micro Finance Institutions; Mortgages
- G32 Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
- L14 Transactional Relationships; Contracts and Reputation; Networks