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Global Banks' Macroeconomic Expectations and Credit Supply

Author

Listed:
  • Xiang Li

    (Halle Institute for Economic Research; Leipzig University)

  • Steven Ongena

    (University of Zurich - Department Finance; Swiss Finance Institute; KU Leuven; NTNU Business School; Centre for Economic Policy Research (CEPR))

Abstract

We examine how global banks’ macroeconomic expectations shape credit supply. Exploiting granular within-firm variation in lender beliefs—by comparing multiple banks lending concurrently to the same firm—alongside an instrumental variable strategy, we document that optimistic GDP growth expectations causally drive credit expansion. Quantitatively, a one-standard-deviation increase in a lender’s GDP forecast expands its loan share by over 8 percentage points (0.75 standard deviations), generating $75 million in additional lending. Conversely, global banks' inflation expectations only impact credit supply during recent high-inflation regimes. Finally, we show that elevated growth expectations induce a distinct reallocation of credit toward riskier borrowing firms.

Suggested Citation

  • Xiang Li & Steven Ongena, 2026. "Global Banks' Macroeconomic Expectations and Credit Supply," Swiss Finance Institute Research Paper Series 26-33, Swiss Finance Institute.
    • Handle: RePEc:chf:rpseri:rp2633
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    Keywords

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    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems

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