Consumption risk sharing among U.S. federal states increases in booms and decreases in recessions. We find that small firms’ access to credit markets plays an important role in explaining this stylized fact: business cycle fluctuations in aggregate risk sharing are more pronounced in states in which small firms account for a large share income or employment. In addition, better access of small ...

187 I N Latin America and around the world, small and medium enterprises (SMEs) comprise a large share of firms, employment, and gross domestic product (GDP). A new World Bank database on SMEs (defined as firms employing up to 250 workers) suggests that they employ nearly 50 percent of the labor force in the formal economy in Mexico; nearly 60 percent in Ecuador and Brazil; around 70 percent in...

The purpose of this essay is to show how credit markets influence development and to argue that the impact of improvements in credit markets is quantitatively significant. The essay first establishes the fact that access to credit is limited, emphasizing the magnitudes. It then goes on to the potential importance of financial sector development, again quantifying the impact. Toward the end of t...

We exploit historical and contemporaneous variation in local credit markets across Russia to identify the impact of credit constraints on firm-level innovation. We find that access to bank credit helps firms to adopt existing products and production processes that are new to them. They introduce these technologies either with the help of suppliers and clients or by acquiring external know-how. ...

The objective of this paper is to determine the factors that favour granting credit in microfinance institution at Local Bank Mutual Agricultural Credit (LBMAC) largest BENIN a rural area. In methodological terms, estimation logistic regression model has been made. Several variables are collected explain access agricultural institution. results estimates show that, having one person as guaranto...

We develop a simple model of credit market imperfections, in which the agents have access to a variety of investment projects, which differ in productivity, in the investment size, and in the severity of the agency problems behind the borrowing constraints. A movement in borrower net worth can shift the composition of the credit between projects with different productivity levels. The model thu...

Credit risk is the most important of banks’ financial risks. As far as the largest Swedish banking groups are concerned, 60 per cent of their assets consist in lending to the public. Consequently, measures for mitigating credit risk are of significant importance for banks in their risk management. During the financial crisis, credit risk in the financial system has become of focal importance fo...