Shock Transmission through Cross-Border Bank Lending: Credit and Real Effects

Galina Hale, Tumer Kapan and Camelia Minoiu

No 2019-052, Finance and Economics Discussion Series from Board of Governors of the Federal Reserve System (U.S.)

Abstract: We study the transmission of financial shocks across borders through international bank connections. Using data on cross-border interbank loans among 6,000 banks during 1997-2012, we estimate the effect of asset-side exposures to banks in countries experiencing systemic banking crises on profitability, credit, and the performance of borrower firms. Crisis exposures reduce bank returns and tighten credit conditions for borrowers, constraining investment and growth. The effects are larger for foreign borrowers, including in countries not experiencing banking crises. Our results document the extent of cross-border crisis transmission, but also highlight the resilience of financial networks to idiosyncratic shocks.

Keywords: cross-border interbank exposures; banking crises; shocks transmission; bank loans; real economy (search for similar items in EconPapers)
JEL-codes: F34 F36 F6 G01 G21 (search for similar items in EconPapers)
Pages: 68 pages
Date: 2019-07-17
New Economics Papers: this item is included in nep-ban, nep-cfn, nep-fdg and nep-ifn
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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https://www.federalreserve.gov/econres/feds/files/2019052pap.pdf (application/pdf)

Related works:
Journal Article: Shock Transmission Through Cross-Border Bank Lending: Credit and Real Effects (2020)
Working Paper: Shock Transmission through Cross-Border Bank Lending: Credit and Real Effect (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedgfe:2019-52

DOI: 10.17016/FEDS.2019.052

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