{"id":9059,"date":"2024-06-14T17:58:28","date_gmt":"2024-06-14T15:58:28","guid":{"rendered":"https:\/\/casmef.luiss.it\/publications\/credit-shocks-lending-relationships-and-economic-activity\/"},"modified":"2026-08-03T17:51:12","modified_gmt":"2026-08-03T15:51:12","slug":"credit-shocks-lending-relationships-and-economic-activity","status":"publish","type":"casmef_publication","link":"https:\/\/casmef.luiss.it\/en\/publications\/credit-shocks-lending-relationships-and-economic-activity\/","title":{"rendered":"Credit shocks, lending relationships and economic activity"},"content":{"rendered":"\n<p class=\"wp-block-paragraph\">Abstract: This paper offers a framework to study the macroeconomic effects of a credit shock, defined as a sudden spike in loans relative to deposits, in an environment in which banks have endogenously-persistent lending relationships with their borrowers. The contribution of this work is to provide a setup that shows how credit shocks interact with bank-firm lending relationships, affect economic activity and drive macroeconomic fluctuations. In presence of lending relationships, a positive credit shock in this model leads to large macroeconomic fluctuations which are absent when lending relationships are not considered. These effects are increasing in the intensity and persistence of lending relationships. Further, higher volatility and persistence of credit shocks lead to increased amplification of macroeconomic volatility which is magnified by presence of lending relationships.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Sharma, V. (2024, June). (CASMEF Working Paper Series No. 3). Arcelli Centre for Monetary and Financial Studies, LUISS Guido Carli.<\/p>\n","protected":false},"template":"","publication_type":[559],"class_list":["post-9059","casmef_publication","type-casmef_publication","status-publish","hentry"],"acf":{"pub_unit":8770,"pub_file":9054},"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v28.6 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>Credit shocks, lending relationships and economic activity - Casmef<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/casmef.luiss.it\/en\/publications\/credit-shocks-lending-relationships-and-economic-activity\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Credit shocks, lending relationships and economic activity - Casmef\" \/>\n<meta property=\"og:description\" content=\"Sharma, V. (2024, June). (CASMEF Working Paper Series No. 3). Arcelli Centre for Monetary and Financial Studies, LUISS Guido Carli.\" \/>\n<meta property=\"og:url\" content=\"https:\/\/casmef.luiss.it\/en\/publications\/credit-shocks-lending-relationships-and-economic-activity\/\" \/>\n<meta property=\"og:site_name\" content=\"Casmef\" \/>\n<meta property=\"article:modified_time\" content=\"2026-08-03T15:51:12+00:00\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:label1\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data1\" content=\"1 minute\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\\\/\\\/schema.org\",\"@graph\":[{\"@type\":\"WebPage\",\"@id\":\"https:\\\/\\\/casmef.luiss.it\\\/en\\\/publications\\\/credit-shocks-lending-relationships-and-economic-activity\\\/\",\"url\":\"https:\\\/\\\/casmef.luiss.it\\\/en\\\/publications\\\/credit-shocks-lending-relationships-and-economic-activity\\\/\",\"name\":\"Credit shocks, lending relationships and economic activity - Casmef\",\"isPartOf\":{\"@id\":\"https:\\\/\\\/casmef.luiss.it\\\/en\\\/#website\"},\"datePublished\":\"2024-06-14T15:58:28+00:00\",\"dateModified\":\"2026-08-03T15:51:12+00:00\",\"breadcrumb\":{\"@id\":\"https:\\\/\\\/casmef.luiss.it\\\/en\\\/publications\\\/credit-shocks-lending-relationships-and-economic-activity\\\/#breadcrumb\"},\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"ReadAction\",\"target\":[\"https:\\\/\\\/casmef.luiss.it\\\/en\\\/publications\\\/credit-shocks-lending-relationships-and-economic-activity\\\/\"]}]},{\"@type\":\"BreadcrumbList\",\"@id\":\"https:\\\/\\\/casmef.luiss.it\\\/en\\\/publications\\\/credit-shocks-lending-relationships-and-economic-activity\\\/#breadcrumb\",\"itemListElement\":[{\"@type\":\"ListItem\",\"position\":1,\"name\":\"Home\",\"item\":\"https:\\\/\\\/casmef.luiss.it\\\/en\\\/\"},{\"@type\":\"ListItem\",\"position\":2,\"name\":\"Credit shocks, lending relationships and economic activity\"}]},{\"@type\":\"WebSite\",\"@id\":\"https:\\\/\\\/casmef.luiss.it\\\/en\\\/#website\",\"url\":\"https:\\\/\\\/casmef.luiss.it\\\/en\\\/\",\"name\":\"Casmef\",\"description\":\"\",\"publisher\":{\"@id\":\"https:\\\/\\\/casmef.luiss.it\\\/en\\\/#organization\"},\"potentialAction\":[{\"@type\":\"SearchAction\",\"target\":{\"@type\":\"EntryPoint\",\"urlTemplate\":\"https:\\\/\\\/casmef.luiss.it\\\/en\\\/?s={search_term_string}\"},\"query-input\":{\"@type\":\"PropertyValueSpecification\",\"valueRequired\":true,\"valueName\":\"search_term_string\"}}],\"inLanguage\":\"en-US\"},{\"@type\":\"Organization\",\"@id\":\"https:\\\/\\\/casmef.luiss.it\\\/en\\\/#organization\",\"name\":\"Casmef\",\"url\":\"https:\\\/\\\/casmef.luiss.it\\\/en\\\/\",\"logo\":{\"@type\":\"ImageObject\",\"inLanguage\":\"en-US\",\"@id\":\"https:\\\/\\\/casmef.luiss.it\\\/en\\\/#\\\/schema\\\/logo\\\/image\\\/\",\"url\":\"https:\\\/\\\/casmef.luiss.it\\\/wp-content\\\/uploads\\\/2026\\\/07\\\/Logo-CASMEF.svg\",\"contentUrl\":\"https:\\\/\\\/casmef.luiss.it\\\/wp-content\\\/uploads\\\/2026\\\/07\\\/Logo-CASMEF.svg\",\"caption\":\"Casmef\"},\"image\":{\"@id\":\"https:\\\/\\\/casmef.luiss.it\\\/en\\\/#\\\/schema\\\/logo\\\/image\\\/\"}}]}<\/script>\n<!-- \/ Yoast SEO plugin. -->","yoast_head_json":{"title":"Credit shocks, lending relationships and economic activity - Casmef","robots":{"index":"index","follow":"follow","max-snippet":"max-snippet:-1","max-image-preview":"max-image-preview:large","max-video-preview":"max-video-preview:-1"},"canonical":"https:\/\/casmef.luiss.it\/en\/publications\/credit-shocks-lending-relationships-and-economic-activity\/","og_locale":"en_US","og_type":"article","og_title":"Credit shocks, lending relationships and economic activity - Casmef","og_description":"Sharma, V. 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