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We construct a country-level indicator capturing the extent to which aggregate bank credit growth originates from banks with a relatively riskier profile, which we label the Riskiness of Credit Origins (RCO). Using bank-level data from 42 countries over more than two decades, we document that RCO variations over time are a feature of the credit cycle. RCO also robustly predicts downside risks to GDP growth even after controlling for aggregate bank credit growth and financial conditions, among other determinants. RCO’s explanatory power comes from its relationship with asset quality, investor and banking sector sentiment, as well as future banking sector resilience. Our findings underscore the importance of bank heterogeneity for theories of the credit cycle and financial stability policy.

Bank credit --- Banks --- Credit aggregates --- Credit booms --- Credit --- Currency crises --- Depository Institutions --- Economic & financial crises & disasters --- Economics of specific sectors --- Economics --- Economics: General --- Finance --- Financial Crises --- Financial Institutions and Services: Government Policy and Regulation --- Financial institutions --- Financial Markets and the Macroeconomy --- Industries: Financial Services --- Informal sector --- Loans --- Macroeconomics --- Micro Finance Institutions --- Monetary economics --- Monetary Policy, Central Banking, and the Supply of Money and Credit: General --- Money and Interest Rates: Forecasting and Simulation --- Money and Monetary Policy --- Money --- Mortgages

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This paper analyzes the effects of product market reforms in the short and medium term across 10 regulated industries and 18 advanced economies for the period 1998-2013 using internationally comparable firm-level data based on Orbis. It provides four key insights. First, product market reforms have positive effects on capital, output and employment and their effects increase over time. After two years, they raise capital by 4%, output by 3% and employment by 1.5%. Second, differences in production technology and the nature of product market regulations across sectors generate important differences in the mechanisms through which reforms operate. In network industries, reforms tend to benefit small firms, while the opposite is observed in retail trade. Product market reforms also promote firm entry, particularly those that reduce entry barriers. Third, credit constraints can play an important role in weakening the positive impact of product market reform on investment. Fourth, product market reforms also tend to have positive effects on firms in downstream sectors—both at home and abroad—that make intensive use of intermediate inputs from deregulated sectors.

Product management --- Industrial productivity --- Economic development --- Development, Economic --- Economic growth --- Growth, Economic --- Economic policy --- Economics --- Statics and dynamics (Social sciences) --- Development economics --- Resource curse --- Productivity, Industrial --- TFP (Total factor productivity) --- Total factor productivity --- Industrial efficiency --- Production (Economic theory) --- Brand management --- Management, Product --- Marketing --- Management --- Aggregate Human Capital --- Aggregate Labor Productivity --- Balance of trade --- Commodity exchanges --- Commodity markets --- Credit aggregates --- Credit --- Economic theory --- Empirical Studies of Trade --- Employment --- Exports and Imports --- Finance --- Finance: General --- Financial markets --- General Financial Markets: General (includes Measurement and Data) --- Income economics --- Intergenerational Income Distribution --- International economics --- International trade --- Labor --- Labour --- Monetary economics --- Monetary Policy, Central Banking, and the Supply of Money and Credit: General --- Money and Monetary Policy --- Money --- Trade in services --- Unemployment --- Wages --- United States