The role of credit in regional divergence: Spanish regions and Eurozone countries

Citation

Dow SC & Rodriguez-Fuentes CJ (2020) The role of credit in regional divergence: Spanish regions and Eurozone countries [O papel do crédito na divergência regional: regiões espanholas e países da Zona do Euro]. Brazilian Journal of Political Economy, 40 (4), pp. 712-727. https://doi.org/10.1590/0101-31572020-3051

Abstract
This paper provides a theoretical account of the role of regional differences in cyclical patterns of credit availability for patterns of regional convergence or divergence. While mainstream theories imply either equalising regional capital flows, or else lower credit availability for peripheral regions due to market imperfections, Post-Keynesian theory of liquidity preference and financial structure imply the scope for greater credit volatility for peripheral regions, especially in downturns, contributing to real economic divergence. This latter account is assessed by means of an empirical analysis of patterns in bank credit over the business cycle among the Spanish regions and Eurozone countries.

Keywords
Credit procyclicality; liquidity preference; Post-Keynesian regional credit theory; Human P. Minsky

Journal
Brazilian Journal of Political Economy: Volume 40, Issue 4

• Published version