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How Do Banks Propagate Economic Shocks?

Author

Listed:
  • Yusuf Emre Akgunduz

    (Sabanci University)

  • Seyit Mumin Cilasun

    (Central Bank of the Republic of Turkey)

  • H. Ozlem Dursun-de Neef

    (Goethe University Frankfurt)

  • Yavuz Selim Hacihasanoglu

    (Central Bank of the Republic of Turkey)

  • Ibrahim Yarba

    (Central Bank of the Republic of Turkey)

Abstract

This paper exploits the COVID-19 pandemic as a negative shock on firm revenues and studies the transmission of this shock across industries via banks. We use the exante heterogeneity in the amount of loans issued to affected industries to measure the variation in banks' exposure to the negative shock. Using bank-_rm level credit register data from Turkey, we show that banks transmitted the shock by decreasing their loan supply not only to affected but also to unaffected industries. The effect persists at the firm level, yet lower for large firms and for firms with an existing relationship to state-owned banks.

Suggested Citation

  • Yusuf Emre Akgunduz & Seyit Mumin Cilasun & H. Ozlem Dursun-de Neef & Yavuz Selim Hacihasanoglu & Ibrahim Yarba, 2022. "How Do Banks Propagate Economic Shocks?," Working Papers 1577, Economic Research Forum, revised 20 Sep 2022.
    • Handle: RePEc:erg:wpaper:1577
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    Other versions of this item:

    • Yusuf Emre Akgunduz & Seyit Mumin Cilasun & H. Ozlem Dursun-de Neef & Yavuz Selim Hacihasanoglu & Ibrahim Yarba, 2021. "How do banks propagate economic shocks?," Working Papers 2124, Research and Monetary Policy Department, Central Bank of the Republic of Turkey.

    More about this item

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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