Global Banks’ Macroeconomic Expectations and Credit Supply

Xiang Li and Steven Ongena

No 20342, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: We investigate how global banks’ macroeconomic expectations for borrower countries influence their credit supply. Utilizing granular data on varying expectations among banks lending to the same firm at the same time, combined with an instrumental variable approach, we find that more optimistic GDP growth expectations for a borrower country are strongly linked to increased credit supply. Specifically, a one standard deviation increase in a lender’s GDP growth expectation for the borrower’s country corresponds to an increase of 8.46 percentage points in the loan share, equivalent to approximately 0.75 standard deviations of the loan share and $75.35 million in loan amount. In contrast, global banks’ short-term inflation expectations do not show a significant impact on their credit supply.

Keywords: Expectations (search for similar items in EconPapers)
JEL-codes: E32 (search for similar items in EconPapers)
Date: 2025-06
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