Dear colleagues, The Department of Economics cordially invites you to the Economic Research Seminar (Department Seminar) on Wednesday, October 25, with Franz R. Hahn (Austrian Institute of Economic Research - WIFO) on "Credit Limits: A Potential Outcome Analysis of Bank-Firm Relationship" Abstract: At the center of this study has been the identification of the empirically and, thus, policy relevant causes of financial contraction. To be specific, our focus has been on identifying the "pure" credit-limiting supply effect in order to assess its importance as it is claimed in the theoretical literature. In order to resolve the underlying identification problem in empirical credit market analysis we apply advanced methods of the matching approach. To the best of our knowledge our work is the first that uses matching techniques to resolve the identification problem in conjunction with credit supply and credit demand. Most importantly, advanced matching techniques allow us to identify the causal effect of credit constraints on non-financial businesses. By comparing the effects of credit constraints on businesses that were exposed to credit limits to those that were not exposed to credit limits but were otherwise identical to the credit-constrained firms prior to the treatment, the selection problem can be solved and the average treatment on the treated is computed as the difference in outcome between those two groups. The empirical analysis is based on a unique, interlinked micro-dataset drawn from banks and business firms of the Austrian economy that covers the pre-crisis period from 2004 onwards, the crisis period 2008 and 2009 and the post- crisis period from 2010 onwards (until 2013). By applying propensity score analysis we are able to show that bank credit limits are not only imposed due to unfavorable demand-side factors (i. e., bad debtors, poor information, weak growth environment, high exposure to external shocks) but also due to supply-side weaknesses such as poor bank capitalization. The overall-picture of our findings even fuels speculation that the average Austrian non-financial company might have been running a much higher credit-limitation risk during the financial crisis and thereafter as many, experts and authorities alike, initially assumed and, what's more, still refuse to believe. Place and time: Wednesday, October 25, 4.30 - 6.00 p.m., Campus WU, Welthandelsplatz 1, 1020 Vienna, building D4, 2nd floor, Department meeting room 2.008 With best regards, Harald Oberhofer --- Univ.-Prof. Dr. Harald Oberhofer Institute for International Economics WU Vienna University of Economics and Business Phone: +43/1/31336-4984 Fax: +43/1/31336-4984 Email: harald.oberhofer@wu.ac.at<mailto:harald.oberhofer@wu.ac.at> Webpage: https://www.wu.ac.at/ie/mitarbeiter/harald-oberhofer/ Austrian Institute of Economic Research (WIFO) Phone: +43/1/7982601-468 Fax: +43/1/7989386 Email: harald.oberhofer@wifo.ac.at<mailto:harald.oberhofer@wifo.ac.at> Webpage: http://www.wifo.ac.at/harald_oberhofer