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The Italian economy has been struggling with low productivity growth and bank balance sheet strains. This paper examines the implications for firm productivity of adverse shocks to bank lending in Italy, using a novel identification scheme and loan-level data on syndicated lending. We exploit the heterogeneous loan exposure of Italian banks to foreign borrowers in distress, and find that a negative shock to bank credit supply reduces firms' loan growth, investment, capital-to-labor ratio, and productivity. The transmission from changes in credit supply to firm productivity relates to labor market rigidities, which delay or distort the adjustment of firms' desired labor and capital allocations, and thereby reduce firms' productivity. Effects are stronger for firms with higher capital intensity and external financial dependence.

Financial crises. --- Financial crises --- Labor market --- Crashes, Financial --- Crises, Financial --- Financial crashes --- Financial panics --- Panics (Finance) --- Stock exchange crashes --- Stock market panics --- Crises --- E-books --- Banks and Banking --- Money and Monetary Policy --- Economic Theory --- Industries: Financial Services --- Production and Operations Management --- Banks --- Depository Institutions --- Micro Finance Institutions --- Mortgages --- Monetary Policy, Central Banking, and the Supply of Money and Credit: General --- Agriculture: Aggregate Supply and Demand Analysis --- Prices --- Production --- Cost --- Capital and Total Factor Productivity --- Capacity --- Financial Markets and the Macroeconomy --- Financial Crises --- Finance --- Monetary economics --- Banking --- Economic theory & philosophy --- Macroeconomics --- Loans --- Bank credit --- Credit --- Supply shocks --- Financial institutions --- Money --- Economic theory --- Total factor productivity --- Banks and banking --- Supply and demand --- Industrial productivity --- Italy

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This paper analyzes spillovers from macroeconomic shocks in systemic economies (China, the Euro Area, and the United States) to the Middle East and North Africa (MENA) region as well as outward spillovers from a GDP shock in the Gulf Cooperation Council (GCC) countries and MENA oil exporters to the rest of the world. This analysis is based on a Global Vector Autoregression (GVAR) model, estimated for 38 countries/regions over the period 1979Q2 to 2011Q2. Spillovers are transmitted across economies via trade, financial, and commodity price linkages. The results show that the MENA countries are more sensitive to developments in China than to shocks in the Euro Area or the United States, in line with the direction of evolving trade patterns and the emergence of China as a key driver of the global economy. Outward spillovers from the GCC region and MENA oil exporters are likely to be stronger in their immediate geographical proximity, but also have global implications.

Business & Economics --- Economic Theory --- Business cycles --- Econometric models. --- Economic cycles --- Economic fluctuations --- Cycles --- Econometric models --- E-books --- Investments: Energy --- Econometrics --- Foreign Exchange --- Macroeconomics --- Industries: Energy --- Time-Series Models --- Dynamic Quantile Regressions --- Dynamic Treatment Effect Models --- Diffusion Processes --- State Space Models --- General Aggregative Models: Forecasting and Simulation --- Business Fluctuations --- International Business Cycles --- Economywide Country Studies: Asia including Middle East --- Energy: Demand and Supply --- Prices --- Energy: General --- Macroeconomics: Production --- Investment & securities --- Econometrics & economic statistics --- Currency --- Foreign exchange --- Petroleum, oil & gas industries --- Oil --- Oil prices --- Vector autoregression --- Real effective exchange rates --- Oil production --- Commodities --- Econometric analysis --- Production --- Petroleum industry and trade --- United States