Global banks' macroeconomic expectations and credit supply

Xiang Li and Steven Ongena

No 8/2025, IWH Discussion Papers from Halle Institute for Economic Research (IWH)

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: asymmetric information; credit supply; expectation; global banks (search for similar items in EconPapers)
JEL-codes: E32 F34 (search for similar items in EconPapers)
Date: 2025
New Economics Papers: this item is included in nep-fdg
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:iwhdps:319911

DOI: 10.18717/dpehpr-1e45

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