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Flight Home, Flight Abroad, and International Credit Cycles

Author

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  • Mariassunta Giannetti
  • Luc Laeven

Abstract

This paper shows that banks exhibit a weaker (stronger) home bias in the extension of new loans when funding conditions in their home country improve (deteriorate). We refer to these changes in home bias as flight abroad and flight home effects, respectively, and show that they are unrelated to the better known flight to quality effect that arises during periods of market turmoil. Our results also indicate that global banks amplify the effect of homegrown shocks on foreign countries while they are a stabilizing factor for the supply of credit in their home countries.

Suggested Citation

  • Mariassunta Giannetti & Luc Laeven, 2012. "Flight Home, Flight Abroad, and International Credit Cycles," American Economic Review, American Economic Association, vol. 102(3), pages 219-224, May.
    • Handle: RePEc:aea:aecrev:v:102:y:2012:i:3:p:219-24
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    References listed on IDEAS

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    1. Carmen M. Reinhart & Kenneth S. Rogoff, 2009. "Varieties of Crises and Their Dates," Introductory Chapters,in: This Time Is Different: Eight Centuries of Financial Folly Princeton University Press.
    2. Carmen M. Reinhart & Kenneth S. Rogoff, 2014. "This Time is Different: A Panoramic View of Eight Centuries of Financial Crises," Annals of Economics and Finance, Society for AEF, vol. 15(2), pages 1065-1188, November.
    3. Giannetti, Mariassunta & Laeven, Luc, 2012. "The flight home effect: Evidence from the syndicated loan market during financial crises," Journal of Financial Economics, Elsevier, vol. 104(1), pages 23-43.
    4. Marco Pagano & Fabio Panetta & and Luigi Zingales, 1998. "Why Do Companies Go Public? An Empirical Analysis," Journal of Finance, American Finance Association, vol. 53(1), pages 27-64, February.
    5. Ivashina, Victoria & Scharfstein, David, 2010. "Bank lending during the financial crisis of 2008," Journal of Financial Economics, Elsevier, vol. 97(3), pages 319-338, September.
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    Cited by:

    1. Demirguc-Kunt,Asli & Horvath,Balint Laszlo & Huizinga,Harry P., 2017. "Foreign banks and international transmission of monetary policy : evidence from the syndicated loan market," Policy Research Working Paper Series 7937, The World Bank.
    2. Douglas Sutherland & Peter Hoeller & Rossana Merola & Volker Ziemann, 2012. "Debt and Macroeconomic Stability," OECD Economics Department Working Papers 1003, OECD Publishing.
    3. Mircea Epure & Irina Mihai & Camelia Minoiu & José-Luis Peydró, 2017. "Household Credit, Global Financial Cycle, and Macroprudential Policies: Credit Register Evidence from an Emerging Country," Working Papers 1006, Barcelona Graduate School of Economics.
    4. Acharya, Viral V. & Afonso, Gara & Kovner, Anna, 2017. "How do global banks scramble for liquidity? Evidence from the asset-backed commercial paper freeze of 2007," Journal of Financial Intermediation, Elsevier, vol. 30(C), pages 1-34.
    5. Stijn Claessens, 2017. "Global Banking: Recent Developments and Insights from Research," Review of Finance, European Finance Association, vol. 21(4), pages 1513-1555.
    6. Fuertes, Ana-Maria & Phylaktis, Kate & Yan, Cheng, 2016. "Hot money in bank credit flows to emerging markets during the banking globalization era," Journal of International Money and Finance, Elsevier, vol. 60(C), pages 29-52.
    7. Tho Pham & Oleksandr Talavera & Andriy Tsapin, 2018. "Shock propaganda, asset quality and lending behaviour," Working Papers 2018-04, Swansea University, School of Management.
    8. Tho Pham & Oleksandr Talavera & Andriy Tsapin, 2018. "Shock propaganda, asset quality and lending behaviour," Working Papers 2018-04, Swansea University, School of Management.
    9. 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.
    10. repec:eee:intfin:v:52:y:2018:i:c:p:211-226 is not listed on IDEAS
    11. Jeon, Bang Nam & Olivero, María Pía & Wu, Ji, 2013. "Multinational banking and the international transmission of financial shocks: Evidence from foreign bank subsidiaries," Journal of Banking & Finance, Elsevier, vol. 37(3), pages 952-972.
    12. Rodano, Giacomo & Serrano-Velarde, Nicolas & Tarantino, Emanuele, 2016. "Bankruptcy law and bank financing," Journal of Financial Economics, Elsevier, vol. 120(2), pages 363-382.
    13. Chouchène, Mabrouk & Ftiti, Zied & Khiari, Wided, 2017. "Bank-to-bank lending channel and the transmission of bank liquidity shocks: Evidence from France," Research in International Business and Finance, Elsevier, vol. 39(PB), pages 940-950.
    14. Elod Takats & Judit Temesvary, 2016. "The currency dimension of the bank lending channel in international monetary transmission," BIS Working Papers 600, Bank for International Settlements.
    15. Tümer Kapan & Camelia Minoiu, 2013. "Balance Sheet Strength and Bank Lending During the Global Financial Crisis," IMF Working Papers 13/102, International Monetary Fund.
    16. Linda S. Goldberg, 2013. "Banking Globalization, Transmission, and Monetary Policy Autonomy," NBER Working Papers 19497, National Bureau of Economic Research, Inc.
    17. Douglas Sutherland & Peter Hoeller, 2012. "Debt and Macroeconomic Stability: An Overview of the Literature and Some Empirics," OECD Economics Department Working Papers 1006, OECD Publishing.
    18. Caroline Van Rijckeghem & Beatrice Weder di Mauro, 2013. "Financial Deglobalization: Is The World Getting Smaller?," Working Papers 2013/14, Bogazici University, Department of Economics.
    19. Van Rijckeghem, Caroline & Weder di Mauro, Beatrice, 2014. "Deglobalization of Banking: The World is Getting Smaller," CEPR Discussion Papers 10139, C.E.P.R. Discussion Papers.
    20. Dia, Enzo & VanHoose, David, 2017. "Capital intensities and international trade in banking services," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 46(C), pages 54-69.

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