## The Real Effects of Financial Sector Interventions During Crises

_IMF Working Papers, March 1, 2011_

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## Bibliographic details
- Authors: Fabian Valencia, Luc Laeven
- Published: March 1, 2011
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781455218974.001

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### Research objective and approach
- Objective: Assess the importance of supply-side credit market frictions by studying the impact of financial sector recapitalization packages on the growth performance of firms.
- Sample and scope: Analysis covers a large cross-section of 50 countries during the recent crisis.
- Identification strategy:
  - Uses the financial crisis as a shock to credit supply.
  - Exploits exogenous variation in the degree to which firms depend on external financing for investment needs.
  - Focuses on policy interventions aimed at alleviating the bank capital crunch.

### Key findings
- Bank recapitalization effects:
  - The growth of firms dependent on external financing is disproportionately positively affected by bank recapitalization policies.
  - The effect is quantitatively important and robust to controlling for other financial sector support policies.
- Fiscal policy effects:
  - Fiscal policy disproportionately boosted growth of firms more dependent on external financing.
- Implication:
  - Results provide new evidence of a quantitatively important role of credit market frictions in influencing real economic activity.

### Subject areas and keywords
- Subject: Bank resolution, Banking, Creditor bail-in, Financial crises, Fiscal policy
- Keywords: bank assets, bank liability, bank support, book value, economic activity, working capital, WP

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_Source: https://www.imf.org/en/publications/wp/issues/2016/12/31/the-real-effects-of-financial-sector-interventions-during-crises-24681_