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International Spillovers and Local Credit Cycles

Author

Listed:
  • Julian di Giovanni
  • Şebnem Kalemli-Özcan
  • Mehmet Fatih Ulu
  • Yusuf Soner Baskaya

Abstract

This article studies the transmission of the Global Financial Cycle (GFC) to domestic credit market conditions in a large emerging market, Turkey, over 2003–13. We use administrative data covering the universe of corporate credit transactions matched to bank balance sheets to document four facts: (1) an easing in global financial conditions leads to lower borrowing costs and an increase in local lending; (2) domestic banks more exposed to international capital markets transmit the GFC locally; (3) the fall in local currency borrowing costs is larger than foreign currency borrowing costs due to the co-movement of the uncovered interest rate parity (UIP) premium with the GFC over time; (4) data on posted collateral for new loan issuances show that collateral constraints do not relax during the boom phase of the GFC.

Suggested Citation

  • Julian di Giovanni & Şebnem Kalemli-Özcan & Mehmet Fatih Ulu & Yusuf Soner Baskaya, 2022. "International Spillovers and Local Credit Cycles," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 89(2), pages 733-773.
    • Handle: RePEc:oup:restud:v:89:y:2022:i:2:p:733-773.
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    File URL: http://hdl.handle.net/10.1093/restud/rdab044
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    JEL classification:

    • E0 - Macroeconomics and Monetary Economics - - General
    • F0 - International Economics - - General
    • F1 - International Economics - - Trade

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