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Measuring the impact of malfunctioning credit markets on productivity
Timothy Besley, Isabelle Roland and John Van Reenen
March 2020
Paper No' :

Tags: the great recession; gdp; public policy

Since the Global Crisis, there has been a renewed awareness of how frictions in credit markets can damage economic efficiency due to a higher cost of capital and/or capital being misallocated away from its most productive uses. This column presents a new methodological approach for calculating the cost of credit frictions which can be implemented with relatively simple data in multiple contexts. It finds that credit market frictions explain half of the fall in UK productivity in the Great Recession and depress output by 28% on average.