American Economic Journal:
Macroeconomics
ISSN 1945-7707 (Print) | ISSN 1945-7715 (Online)
Credit Supply Shocks and Prices: Evidence from Danish Firms
American Economic Journal: Macroeconomics
vol. 16,
no. 2, April 2024
(pp. 1–28)
Abstract
We study the response of firms' output prices to a cut in credit supply. We combine data on loans between Danish firms and banks with survey-based producer prices and transaction-based export unit values. Exploiting banks' heterogeneous exposure to the global financial crisis, we show that loans to firms with relationships to exposed banks drop and lending rates increase. In response, firms raise prices by 3–5 percent. This effect is decreasing in the elasticity of firms' demand but positive for most industrial production. Our results show that firms increase prices to raise cash when external sources of liquidity dry up.Citation
Renkin, Tobias, and Gabriel Züllig. 2024. "Credit Supply Shocks and Prices: Evidence from Danish Firms." American Economic Journal: Macroeconomics 16 (2): 1–28. DOI: 10.1257/mac.20220079Additional Materials
JEL Classification
- D22 Firm Behavior: Empirical Analysis
- E23 Macroeconomics: Production
- E31 Price Level; Inflation; Deflation
- E32 Business Fluctuations; Cycles
- E44 Financial Markets and the Macroeconomy
- G01 Financial Crises
- G21 Banks; Depository Institutions; Micro Finance Institutions; Mortgages