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Shocks Abroad, Pain at Home? Bank-Firm-Level Evidence on the International Transmission of Financial Shocks

Author

Listed:
  • Steven Ongena
  • José-Luis Peydró
  • Neeltje van Horen

Abstract

The paper studies the international transmission of shocks from the banking to the real sector during the global financial crisis. For identification, it uses matched bank-firm-level data, covering mainly small and medium-sized firms in Eastern Europe and Turkey, and exploits the Lehman failure. The paper finds that internationally borrowing domestic and especially foreign owned banks contract their credit more during the crisis than locally funded domestic banks do. Firms dependent on credit and with a relationship with internationally borrowing domestic or foreign banks suffer more in their financing and real performance, especially when single-bank, small or with limited tangible assets. Moreover, firms in countries with lower financial development, more reliance on foreign funding and slower contract enforcement are more affected. Overall the results suggest the existence of spillovers to the real sector through an international banking channel but with heterogeneous effects across firms and countries.

Suggested Citation

  • Steven Ongena & José-Luis Peydró & Neeltje van Horen, 2015. "Shocks Abroad, Pain at Home? Bank-Firm-Level Evidence on the International Transmission of Financial Shocks," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 63(4), pages 698-750, November.
  • Handle: RePEc:pal:imfecr:v:63:y:2015:i:4:p:698-750
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    Citations

    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. ‘Running for the exit’: How cross-border bank lending fell
      by bankunderground in Bank Underground on 2018-09-19 08:00:52

    Citations

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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. Niepmann, Friederike & Schmidt-Eisenlohr, Tim, 2017. "No guarantees, no trade: How banks affect export patterns," Journal of International Economics, Elsevier, vol. 108(C), pages 338-350.
    3. Luís A.V. Catão & Daniel Marcel te Kaat, 2018. "Capital Account Liberalization and the Composition of Bank Liabilities," Working Papers REM 2018/53, ISEG - Lisbon School of Economics and Management, REM, Universidade de Lisboa.
    4. 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.
    5. Bruno, Brunella & D'Onofrio, Alexandra & Marino, Immacolata, 2017. "Determinants of bank lending in Europe and the United States: Evidence from crisis and post-crisis years," CEPR Discussion Papers 12002, C.E.P.R. Discussion Papers.
    6. Kristian Blickle, 2017. "Local Banks, Credit Supply, and House Prices," Working Papers on Finance 1811, University of St. Gallen, School of Finance.
    7. repec:eee:intfin:v:53:y:2018:i:c:p:158-178 is not listed on IDEAS
    8. Rehbein, Oliver, 2018. "Flooded through the back door: Firm-level effects of banks' lending shifts," IWH Discussion Papers 4/2018, Halle Institute for Economic Research (IWH).
    9. Ramon Moreno & José María Serena Garralda, 2018. "Firms' credit risk and the onshore transmission of the global financial cycle," BIS Working Papers 712, Bank for International Settlements.
    10. repec:eee:finsta:v:39:y:2018:i:c:p:259-272 is not listed on IDEAS
    11. Noth, Felix & Ossandon Busch, Matias, 2017. "Banking globalization, local lending, and labor market effects: Micro-level evidence from Brazil," IWH Discussion Papers 7/2017, Halle Institute for Economic Research (IWH).
    12. Kleymenova, Anya & Rose, Andrew K. & Wieladek, Tomasz, 2016. "Does government intervention affect banking globalization?," Journal of the Japanese and International Economies, Elsevier, vol. 42(C), pages 146-161.
    13. repec:eee:jbfina:v:90:y:2018:i:c:p:131-145 is not listed on IDEAS
    14. Shusen Qi & Ralph De Haas & Steven Ongena & Stefan Straetmans, 2017. "Move a Little Closer? Information Sharing and the Spatial Clustering of Bank Branches," Swiss Finance Institute Research Paper Series 17-74, Swiss Finance Institute.
    15. repec:eee:finsta:v:36:y:2018:i:c:p:82-97 is not listed on IDEAS
    16. Dombret, Andreas R. & Foos, Daniel & Pliszka, Kamil & Schulz, Alexander, 2018. "What are the real effects of financial market liquidity? Evidence on bank lending from the euro area," Discussion Papers 34/2018, Deutsche Bundesbank.
    17. Eguren-Martin, Fernando & Ossandon Busch, Matias & Reinhardt, Dennis, 2018. "FX funding shocks and cross-border lending: fragmentation matters," Bank of England working papers 762, Bank of England.
    18. Littke, Helge C. N. & Ossandon Busch, Matias, 2018. "Banks fearing the drought? Liquidity hoarding as a response to idiosyncratic interbank funding dry-ups," IWH Discussion Papers 12/2018, Halle Institute for Economic Research (IWH).
    19. Bryan Hardy, 2018. "Foreign currency borrowing, balance sheet shocks and real outcomes," BIS Working Papers 758, Bank for International Settlements.
    20. repec:eee:jimfin:v:88:y:2018:i:c:p:140-157 is not listed on IDEAS

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