International Liquidity Shock and Bank Resilience: Evidence from Matched Bank-Firm Data

Youngju Kim, Hyunjoon Lim and Youngjin Yun ()
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Youngju Kim: Bank of Korea
Hyunjoon Lim: Bank of Korea

No 2022-2, Inha University IBER Working Paper Series from Inha University, Institute of Business and Economic Research

Abstract: Banks are the first line of defense against the propagation of adverse external shocks. This study examines the role of banks in the transmission of international liquidity shock using matched bank-firm data for Korea over the 2006-2015 period. We measure individual banks’ sensitivity to international shocks by analyzing their foreign exchange (FX) borrowing rates. The bank from which a firm borrows matters in times of FX liquidity shocks. We find that sensitive banks reduce FX credit supply to firms and that FX loan-reliant, highly productive firms subsequently reduce their investment. Foreign banks are affected less by the shocks, but they reduce credit supply more than domestic banks. Our findings emphasize the importance of bank resilience vis-à -vis external and domestic stability.

Keywords: international liquidity shock; FX loan; credit register; real effect (search for similar items in EconPapers)
JEL-codes: E22 F34 G15 (search for similar items in EconPapers)
Pages: 35 pages
Date: 2022-12
New Economics Papers: this item is included in nep-ban, nep-fdg, nep-ifn and nep-mon
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Persistent link: https://EconPapers.repec.org/RePEc:inh:wpaper:2022-2

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