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From Financial Crisis to Great Recession: The Role of Globalized Banks

Shekhar Aiyar ()

American Economic Review, 2012, vol. 102, issue 3, 225-30

Abstract: This paper provides evidence of the role of globalized banks in transmitting financial stresses to the real economy during the global financial crisis. A novel dataset is constructed from quarterly balance sheet reports provided by all UK-resident banks to the Bank of England. I find that the shock to bank funding from non-resident creditors was transmitted domestically through a significant reduction in bank credit supply. Resident subsidiaries and branches of foreign-owned banks reduced lending by a larger amount than domestically-owned banks, while the latter calibrated the reduction in domestic lending more closely to the size of the funding shock.

Date: 2012
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