A1593
Title: Hydrogeological risk and accessing credit for Italian SME
Authors: Andrea Cipollini - University of Palermo (Italy)
Fabio Parla - University of Palermo (Italy)
Fabio Parla - University of Palermo (Italy) [presenting]
Abstract: The focus is on the impact of hydrogeological risk on credit market conditions for Italian SME. The contribution to the recent literature, which uses NUTS3 data for Europe, is by using a more granular dataset computed at the municipal level. More specifically, the reliance is on a Panel VARX fitted to proxies of credit market conditions retrieved from European DataWarehouse (EDW). The exogenous variable is the climate sentiment time series for Italy, interacting with cross-sectional data measuring hydrogeological risk available at the municipal level from ISPRA. The two endogenous variables are, first, two different proxies of access to finance: either interest rates on loans or a credit supply indicator constructed using the procedure developed by a past study. The other endogenous variable is the default rate. The quarterly dataset available for the 2008-2021 period allows the usage of a mean group estimator to account for heterogeneity. As a robustness check, the size of the bank granting loans and the firm accessing credit is controlled for. Moreover, the loss given default is computed at the municipal level as an alternative proxy of credit risk. While the literature using proxies of credit market conditions as dependent variables in single equation regression implicitly considers the endogenous variables orthogonal to each other, the use of a Panel VAR allows accounting for their interaction, avoiding a downward bias in stress testing exercises.
