Italy’s Bank explores estimation strategy used within companies

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TLDR: The Bank of Italy has published a working paper that examines the within-firm estimation strategy, which is used to estimate the effects of bank shocks on the credit available to firms. The paper, titled “Connecting the dots: the network nature of shocks propagation in credit markets,” presents a simplified model of a credit market where firms borrow from multiple banks.

The authors highlight the importance of the within-firm estimation strategy in assessing the impact of bank shocks on credit availability. The strategy allows policymakers to understand how shocks to one bank can affect the overall credit market and the ability of firms to borrow.

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