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From Financial Crisis to Great Recession: The Role of Globalized Banks

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  • Shekhar Aiyar

Abstract

This paper provides evidence of the role of globalized banks in transmitting financial stresses to the real economy during the global financial crisis. A novel dataset is constructed from quarterly balance sheet reports provided by all UK-resident banks to the Bank of England. I find that the shock to bank funding from non-resident creditors was transmitted domestically through a significant reduction in bank credit supply. Resident subsidiaries and branches of foreign-owned banks reduced lending by a larger amount than domestically-owned banks, while the latter calibrated the reduction in domestic lending more closely to the size of the funding shock.

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File URL: http://www.aeaweb.org/articles.php?doi=10.1257/aer.102.3.225
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Bibliographic Info

Article provided by American Economic Association in its journal American Economic Review.

Volume (Year): 102 (2012)
Issue (Month): 3 (May)
Pages: 225-30

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Handle: RePEc:aea:aecrev:v:102:y:2012:i:3:p:225-30

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  1. Aiyar, Shekhar, 2011. "How did the crisis in international funding markets affect bank lending? Balance sheet evidence from the United Kingdom," Bank of England working papers 424, Bank of England.
  2. Shekhar Aiyar & Charles W. Calomiris & Tomasz Wieladek, 2012. "Does Macro-Pru Leak? Evidence from a UK Policy Experiment," NBER Working Papers 17822, National Bureau of Economic Research, Inc.
  3. Ralph De Haas & Neeltje Van Horen, 2011. "Running for the exit: international banks and crisis transmission," Working Papers 124, European Bank for Reconstruction and Development, Office of the Chief Economist.
  4. Ralph De Haas & Iman Van Lelyveld, 2008. "Internal capital markets and lending by multinational bank subsidiaries," Working Papers 105, European Bank for Reconstruction and Development, Office of the Chief Economist.
  5. Nicola Cetorelli & Linda S. Goldberg, 2010. "Global banks and international shock transmission: evidence from the crisis," Staff Reports 446, Federal Reserve Bank of New York.
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Cited by:
  1. Shekhar Aiyar & Romain A Duval & Damien Puy & Yiqun Wu & Longmei Zhang, 2013. "Growth Slowdowns and the Middle-Income Trap," IMF Working Papers 13/71, International Monetary Fund.
  2. Tümer Kapan & Camelia Minoiu, 2013. "Balance Sheet Strength and Bank Lending During the Global Financial Crisis," IMF Working Papers 13/102, International Monetary Fund.
  3. Adams-Kane, Jonathon & Caballero, Julian A. & Lim, Jamus Jerome, 2013. "Foreign bank behavior during financial crises," Policy Research Working Paper Series 6590, The World Bank.
  4. Ralph De Haas & Neeltje Van Horen, 2013. "Running for the Exit? International Bank Lending During a Financial Crisis," Review of Financial Studies, Society for Financial Studies, vol. 26(1), pages 244-285.
  5. Shekhar Aiyar & Sonali Jain-Chandra, 2012. "The Domestic Credit Supply Response to International Bank Deleveraging," IMF Working Papers 12/258, International Monetary Fund.

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