Drivers of Bank Credit Evolution in Mexican Regions during the COVID-19 Pandemic
DOI:
https://doi.org/10.60758/laer.v37i.564Keywords:
Supply and Demand Shocks, Bank Credit, SVARAbstract
This paper examines the impact of supply and demand shocks on the evolution of bank credit to firms across Mexican regions during the COVID-19 pandemic, using a Structural Vector Autoregression (SVAR) model with sign restrictions and data from January 2006 to May 2023. Our findings indicate a common rise in bank credit to firms at the onset of the pandemic, likely due to precautionary measures. However, this was followed by a notable contraction, especially in the central region. Our analysis reveals that demand factors predominantly influenced this contraction in the central region, while supply factors were more impactful in the northern and north-central regions. This regional divergence may be attributed to the central region’s weaker economic recovery and the northern regions’ challenges with increased costs and input scarcity in manufacturing. Recently, aggregate demand shocks have been key in reviving bank credit, particularly in the northern and central regions.
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