Riccardo De Bonis

The Italian banking system: Facts and interpretations

The paper compares the essential features of the Italian banking system with those of the other large euro-area countries. The analysis focuses on banks’ size, ownership and competitiveness, their role in financing firms, the composition of their balance sheets and their degree of internationalization, profitability and terms for customers. Within this overall framework the paper examines the banking system’s response to the financial crisis of 2007-09 and subsequent developments. The progress made in decades past is recalled and further necessary steps set out.

Do Firm-Bank Relationships Affect Firms’ Internationalization?

We test whether the length of a firm–bank relationship affects firms’ foreign direct investment (FDI) and/or exports and if this nexus depends on the main bank itself being internationalized. The analysis is carried out on matched micro-data from a large survey of Italian manufacturing enterprises from 1998 to 2003. Our main result is that a longer relationship with the main bank fosters firms’ FDI but does not affect exports. Moreover, when the main bank has subsidiaries abroad this result is strengthened for FDI and there is even a weak positive effect of the duration of the firm–bank relationship on exports.

Firms’ financial surpluses in advanced economies: the role of net foreign direct investments

According to macroeconomic predictions firms are expected to be net borrowers: the net change of their financial assets should be smaller than the net change of their financial liabilities. However, since the mid-1990s, the non-financial sector has been on average a net lender in countries such as Japan, the UK, Germany and the Netherlands. Conversely firms remained on average net borrowers in countries such as France, Italy and the US. Using financial accounts, we investigate the sources of corporate sector surpluses and deficits applying panel data techniques. Our statistics include 18 industrial countries over the period 1995–2014. We find that firms’ surpluses are structurally linked to net foreign direct investments. The econometric results are robust to the use of variables that control for the business cycle, such as the output gap, the ratio of corporate investment to GDP, firms’ profits and leverage, and taxation.

Firmss Financial Surpluses in Advanced Economies: The Role of Net Foreign Direct Investments

According to macroeconomic predictions firms are expected to be net borrowers: the net change of their financial assets should be smaller than the net change of their financial liabilities. However, since the mid-1990s, the non–financial sector has been on average a net lender in countries such as Japan, the UK, Germany and the Netherlands. Conversely firms remained on average net borrowers in countries such as France, Italy and the US. Using financial accounts, we investigate the sources of corporate sector surpluses and deficits applying panel data techniques. Our statistics include 18 industrial countries over the period 1995-2014. We find that firms’ surpluses are structurally linked to net foreign direct investments. The econometric results are robust to the use of variables that control for the business cycle, such as the output gap, the ratio of corporate investment to GDP, firms’ profits and leverage, and taxation.

Determinants and Consequences of Credit Tightening: An Analysis of the United States and the Euro Area

The interaction between the financial and the real sectors of the econ- omy has been studied intensively in the past- We may refer to different strands of the literature, such as the correlation between money and national income (Friedman and Schwartz, 1963); the non-monetary effects of the banking crises in the propagation of the Great Depres- sion (Bernanke, 1983); the links between money, credit and GDP (Sims, 1972; Bernanke and Blinder, 1988, 1992); and the bank lending channel (Kashyapetal., 1993).

Financial Systems: Introduction and Summary

For good or for bad, finance has a pervasive role in modern economies. Understanding the functioning and evolution of financial markets and intermediaries and their interconnections with the real world is an old theme in economics, but one that needs continuous updating to keep pace with financial innovation on one side and the development of new statistical tools for their analysis on the other. This introductory chapter gives an overview of how interest in understanding the financial aspects of the economy has fluctuated considerably in the past, before reaching centre-stage in recent years. It also argues that the clarity of the macroeconomic picture of a country’s financial structure offered by its financial accounts is difficult to match, and it illustrates the thread connecting the essays included in the rest of the book. The key message is that financial accounts can be a powerful tool for understanding the structure and the weaknesses of financial systems.

Do Financial Systems Converge

Many authors underlined the convergence of financial structures towards a model which combines elements of the Anglo Saxon one, where markets prevail, with characteristics of the continental European systems, where intermediaries are predominant. The goal of this paper is to study financial systems convergence through the lens of household asset allocation. We analyze s and s convergence of total household financial assets and their main components: deposits, securities other than shares, shares and other equity, insurance technical reserves. The novelty of the paper is to exploit a database containing time series since 1980 for nine OECD countries. Using disposable income as a scale variable, we found convergence of household total financial assets, insurance technical reserves and shares and other equity. Weaker results are obtained for convergence of household securities other than shares, and currency and deposits. In a nutshell, financial systems show signals of convergence in asset allocation, but national characteristics persist when households invest in securities and deposits.