A working paper released by the Belgian National Bank proposes a new econometric model that can identify credit demand and supply shocks specific to each firm‑bank relationship. The method builds on the bipartite network framework of Abowd’s (1999) but relaxes their strict covariance assumptions, allowing a consistent and asymptotically normal estimator under weaker network density requirements. Using the model, the authors analysed thousands of firm‑bank ties across nine Euro‑area countries and three distinct economic periods. They found that Abowd’s assumptions fail in almost every country‑period and that shocks within a firm‑bank pair are as large as between‑pair shocks. The study also documents significant bias in earlier estimates and shows that the post‑2022 monetary contraction has had a detrimental impact on exposed firms, revealing new heterogeneity in monetary‑policy transmission.
© National Bank of Belgium (BNB).
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