Global Banks' Spillovers to Emerging Markets: Macro to Micro Transmission

This paper studies how shocks to global banks' net worth transmit to Emerging Market Economies. Using the identification strategy of Ottonello and Song (2022), which isolates high-frequency surprises to banks' credit supply capacity, we show that positive shocks appreciate local currencies, lower external borrowing costs, increase capital flows to domestic banking sectors, and raise investment, credit, and real activity across EMEs. These effects are highly robust across specifications and samples. Using administrative credit-registry data from Uruguay, we find that better capitalized banks transmit global credit easing more strongly. At the firm level, responses are weaker for more leveraged firms, especially those with foreign-currency debt, short maturities, or collateral not priced to market.