Trade shocks, credit reallocation and the role of specialisation: Evidence from syndicated lending

Isabella Müller

No 15/2020, IWH Discussion Papers from Halle Institute for Economic Research (IWH)

Abstract: This paper provides evidence that banks cut lending to US borrowers as a consequence of a trade shock. This adverse reaction is stronger for banks with higher ex-ante lending to US industries hit by the trade shock. Importantly, I document large heterogeneity in banks' reaction depending on their sectoral specialisation. Banks shield industries in which they are specialised in and at the same time reduce the availability of credit to industries they are not specialised in. The latter is driven by low-capital banks and lending to firms that are themselves hit by the trade shock. Banks' adjustments have adverse real effects.

Keywords: trade liberalisation; credit supply; sector specialisation; real effects (search for similar items in EconPapers)
JEL-codes: F14 F65 G21 (search for similar items in EconPapers)
Date: 2020
New Economics Papers: this item is included in nep-ban
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:iwhdps:152020

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