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Liquidity Shocks And The Supply Of Credit After The 2007–2008 Crisis

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  • Tümer Kapan
  • Camelia Minoiu

Abstract

ABSTRACT We examine the impact of heightened liquidity risk in bank funding markets during the 2007–2008 subprime crisis on the supply of credit to firms internationally. Our sample comprises almost 800 banks lending in the syndicated loan market to borrowers from 48 advanced and emerging market economies. To control for simultaneous changes in demand, we relate within‐borrower changes in bank credit from multiple banks to banks' exposure to liquidity risk. To capture banks' vulnerability to the liquidity shocks that occurred during 2007–2008, we use measures of pre‐crisis reliance on wholesale funding. Our results suggest that banks that were more exposed to liquidity risk during the crisis reduced syndicated lending more than other banks. Our results are robust to alternate measures of vulnerability to liquidity risk, choice of sample period and simultaneous movements in exchange rates. Copyright © 2013 John Wiley & Sons, Ltd.

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  • Tümer Kapan & Camelia Minoiu, 2014. "Liquidity Shocks And The Supply Of Credit After The 2007–2008 Crisis," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 19(1), pages 12-23, January.
    • Handle: RePEc:wly:ijfiec:v:19:y:2014:i:1:p:12-23
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    Cited by:

    1. Karlo Kauko, 2017. "A Short Note on the Net Stable Funding Ratio Requirement with Endogenous Money," Economic Notes, Banca Monte dei Paschi di Siena SpA, vol. 46(1), pages 105-115, February.
    2. P. Pessarossi & F. Vinas, 2015. "Banks’ supply of long term credit after a liquidity shock: Evidence from 2007-2009," Débats économiques et financiers 16, Banque de France.
    3. Jari‐Mikko Meriläinen, 2020. "Bank ownership type and temporal evolution of long‐term bank funding in the period 2005–2017," Annals of Public and Cooperative Economics, Wiley Blackwell, vol. 91(2), pages 237-268, June.
    4. Pierre Pessarossi & Frédéric Vinas, 2015. "The supply of long-term credit after a funding shock: evidence from 2007-2009," Post-Print halshs-01224523, HAL.
    5. Jian, Zhihong & Li, Xupei, 2021. "Skewness-based market integration: A systemic risk measure across international equity markets," International Review of Financial Analysis, Elsevier, vol. 74(C).
    6. Correa, Ricardo & Sapriza, Horacio & Zlate, Andrei, 2021. "Wholesale funding runs, global banks' supply of liquidity insurance, and corporate investment," Journal of International Economics, Elsevier, vol. 133(C).

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