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

Vol. 40 No. 4 (2020)

Oct-Dez/2020
Published October 23, 2020
PDF-English
PDF-English

How to Cite

Dow, Sheila C., and Carlos J. Rodríguez-Fuentes. 2020. “The Role of Credit in Regional Divergence: Spanish Regions and Eurozone Countries”. Brazilian Journal of Political Economy 40 (4):712-27. https://doi.org/10.1590/0101-31572020-3051.

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

Sheila C. Dow
Department of Economics, University of Stirling, Stirling, Scotland.
Carlos J. Rodríguez-Fuentes
Departamento de Economía Aplicada y Métodos Cuantitativos, Universidad de La Laguna, La Laguna, Spain.
Brazilian Journal of Political Economy, Vol. 40 No. 4 (2020), Oct-Dez/2020, Pages 712-727

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.

JEL Classification: B5; E5; R11.


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