Banking globalization, local lending, and labor market effects: Micro-level evidence from Brazil

Felix Noth and Matias Ossandon Busch

Journal of Financial Stability, 2021, vol. 56, issue C

Abstract: Recent financial crises have prompted the interest in understanding how banking globalization interacts with domestic institutions in shaping foreign shocks’ transmission. This paper uses regional banking data from Brazil to show that a foreign funding shock to banks negatively affects lending by their regional branches. This effect increases in the presence of frictions in internal capital markets, which affect branches’ capacity to access funding from other regions via intra-bank linkages. These results also matter on an aggregate level, as municipality-level credit and job flows drop in exposed regions. Policies aiming to reduce the fragmented structure of regional banking markets could moderate the propagation of foreign shocks.

Keywords: Capital flows reversals; Bank branches funding; Bank lending; Regional labor markets (search for similar items in EconPapers)
JEL-codes: E24 E44 G01 G21 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Working Paper: Banking globalization, local lending, and labor market effects: Micro-level evidence from Brazil (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finsta:v:56:y:2021:i:c:s1572308921000917

DOI: 10.1016/j.jfs.2021.100933

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