Credit allocation to businesses in Italy amid the Covid-19 crisis

This note investigates the credit allocation process to businesses in Italy during the Covid-19 crisis, utilizing methodologies from Herrera et al. (2011) for gross credit flows and Cuciniello and di Iasio (2020) for the intensive and extensive margins. It reveals that the surge in net credit flows was primarily driven by gross credit expansion, with about 50 percent of the fluctuation attributed to the rise in public guaranteed loans. Additionally, fluctuations in credit expansion are predominantly influenced by the intensive margin, particularly the debt increase of firms with pre-existing multiple bank relationships, where lenders have lower exposure to their debt.