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How do banks propagate economic shocks?

Author

Listed:
  • Akgündüz, Yusuf Emre
  • Cılasun, Seyit Mümin
  • Dursun-de Neef, H. Özlem
  • Hacıhasanoğlu, Yavuz Selim
  • Yarba, İbrahim

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 ex-ante heterogeneity in the amount of loans issued to affected industries to measure the variation in banks’ exposure to the negative shock. Using bank-firm level credit register data from Türkiye, 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 is lower for large firms and firms with an existing relationship with state-owned banks.

Suggested Citation

  • Akgündüz, Yusuf Emre & Cılasun, Seyit Mümin & Dursun-de Neef, H. Özlem & Hacıhasanoğlu, Yavuz Selim & Yarba, İbrahim, 2026. "How do banks propagate economic shocks?," European Economic Review, Elsevier, vol. 186(C).
    • Handle: RePEc:eee:eecrev:v:186:y:2026:i:c:s0014292126000747
    DOI: 10.1016/j.euroecorev.2026.105330
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    2. Akgündüz, Yusuf Emre & Cılasun, Seyit Mümin & Dursun-de Neef, H. Özlem & Hacıhasanoğlu, Yavuz Selim & Yarba, Ibrahim, 2025. "Foreign bank lending during COVID-19," Journal of Banking & Finance, Elsevier, vol. 178(C).

    More about this item

    Keywords

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    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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