Vulnerable funding in the global economy

Helena Chuliá, Ignacio Garrón and Jorge Uribe

Journal of Banking & Finance, 2024, vol. 169, issue C

Abstract: This study builds on the conceptual framework of vulnerable growth to examine how US financial shocks influence the conditional distribution of real credit growth across a diverse set of countries, a phenomenon we term vulnerable funding. We show that deteriorating US financial conditions are linked to a reduction in real credit growth abroad, with particularly pronounced effects at the lower quantiles of real credit growth abroad. This suggests that, in common with the episodes of vulnerable growth discussed in the extant literature, episodes of vulnerable funding are also triggered globally by financial weakness in the US. However, our analysis reveals significant variation in the impact of US financial shocks across the quantiles of credit growth in countries worldwide. Specifically, countries with lower credit-to-GDP ratios or with higher levels of US investment relative to their GDP exhibit greater real credit growth vulnerability.

Keywords: Financial conditions; Financial uncertainty; Quantile regression; Credit growth (search for similar items in EconPapers)
JEL-codes: E44 F34 F37 F44 G15 (search for similar items in EconPapers)
Date: 2024
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Related works:
Working Paper: Vulnerable Funding in the Global Economy (2021)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:169:y:2024:i:c:s0378426624002280

DOI: 10.1016/j.jbankfin.2024.107314

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