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Spillovers of funding dry-ups

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  • Aldasoro, Iñaki
  • Balke, Florian
  • Barth, Andreas
  • Eren, Egemen

Abstract

We uncover a new channel for spillovers of funding dry-ups. The US money market fund (MMF) reform led to an exogenous reduction in unsecured MMF funding for some banks. We use novel data to trace those banks to a corporate deposit funding platform. As they sought to replace the lost dollar funding, the funding squeeze spilled over to other banks with no MMF exposure. The latter paid more for corporate dollar deposits, and their pool of funding providers deteriorated. Their dollar lending volumes and margins declined. Our results suggest banks’ competitiveness in funding markets affect their competitiveness in lending markets.

Suggested Citation

  • Aldasoro, Iñaki & Balke, Florian & Barth, Andreas & Eren, Egemen, 2022. "Spillovers of funding dry-ups," Journal of International Economics, Elsevier, vol. 137(C).
    • Handle: RePEc:eee:inecon:v:137:y:2022:i:c:s002219962200054x
    DOI: 10.1016/j.jinteco.2022.103622
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    Cited by:

    1. Aldasoro, Iñaki & Ehlers, Torsten & Eren, Egemen, 2022. "Global banks, dollar funding, and regulation," Journal of International Economics, Elsevier, vol. 137(C).
    2. Iñaki Aldasoro & Wenqian Huang & Esti Kemp, 2020. "Cross-border links between banks and non-bank financial institutions," BIS Quarterly Review, Bank for International Settlements, September.
    3. Kyungmin Kim & Antoine Martin & Ed Nosal, 2020. "Can the U.S. Interbank Market Be Revived?," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 52(7), pages 1645-1689, October.

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    More about this item

    Keywords

    Funding dry-ups; Spillovers; Money market funds; Corporate deposits; Dollar funding; Banks;
    All these keywords.

    JEL classification:

    • 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

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