Channels of transmission of the 2007/09 global crisis to international bank lending in developing countries

Jonathon Adams-Kane, Yueqing Jia and Jamus Lim

No 6011, Policy Research Working Paper Series from The World Bank

Abstract: During a financial crisis, credit provision by international banks may be stymied by three distinct, but related, channels: changes in lending standards as a result of increased economic uncertainty, changes in funding availability from interbank liquidity markets, and changes in solvency due to effects on bank balance sheets. This paper illuminates the manner by which each of these channels independently operated to affect developed-country bank lending in developing countries during the global financial crisis of 2007/09. It quantifies how changes in banks'uncertainty about the value of their asset holdings, access to interbank liquidity, and internal balance sheet considerations altered their supply of credit in the run-up, during, and in the immediate aftermath of the financial crisis, both in terms of their relative magnitudes, as well as the sensitivity of these magnitudes to the crisis.

Keywords: Debt Markets; Banks&Banking Reform; Bankruptcy and Resolution of Financial Distress; Access to Finance; Economic Theory&Research (search for similar items in EconPapers)
Date: 2012-03-01
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Citations: View citations in EconPapers (3)

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