Author(s): Pedro Medeiros
In the context of the ecu crisis, we tend to show that the safety portfolio of banks plays a crucial role within the propagation of monetary shocks across countries. Victimization Italian loan-level information, we tend to show that the shock to the banks’ sovereign portfolio caused by Greek bailout was passed on to Italian companies through a credit contraction. This was significantly the case for banks with a lower capital and fewer stable funding. The contraction in credit was similar for each massive and little company; however it solely negatively affected the investment and employment selections of tiny companies. Money intermediaries play a basic role in enhancing economic process, disposition to companies and households and reallocating capital to the highest-value use.