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"Vulnerable Funding in the Global Economy"


  • Helena Chuliá

    (Riskcenter- IREA and Department of Econometrics, University of Barcelona.)

  • Ignacio Garrón

    (Riskcenter- IREA and Department of Econometrics, University of Barcelona.)

  • Jorge M. Uribe

    (Faculty of Economics and Business Studies, Open University of Catalonia.)


We study the international propagation of financial conditions from the United States to global financial markets. The impact is highly heterogeneous along the quantiles of the distribution of the two major funding sources, credit and equity. Indeed, it is greater in the lower quantiles, which means that, like vulnerable growth episodes examined by past literature, there is also vulnerable funding periods of a global scale that result from financial weakness in the US. These episodes are related to downside risk in terms of credit creation and the market value of firms around the world. Our estimates differentiate between first and second moment (i.e. uncertainty) shocks to financial conditions. This distinction is shown to be relevant as it uncovers a complex propagation of shocks via different economic channels. On one hand, credit growth responds largely to first moment shocks of US financial conditions four quarters after they occurred, which is consistent with a credit view explanation of the transmission. On the other hand, stock markets react more sensitively and rapidly (mainly within a quarter) to second moment shocks, which can be theoretically associated with a portfolio channel underlying the spread of shocks. We also document a heterogeneous impact across countries. In the case of credit growth this heterogeneity is better explained by the size or depth of the markets, while in the case of stock markets, the explanation is rooted in the strength of the financial connectedness with the US.

Suggested Citation

  • Helena Chuliá & Ignacio Garrón & Jorge M. Uribe, 2021. ""Vulnerable Funding in the Global Economy"," IREA Working Papers 202106, University of Barcelona, Research Institute of Applied Economics, revised Mar 2021.
  • Handle: RePEc:ira:wpaper:202106

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    References listed on IDEAS

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    More about this item


    Financial conditions; Financial uncertainty; Quantile regression; Credit growth; Stock market. JEL classification: E44; F34; F37; F44; G15.;
    All these keywords.

    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems
    • F37 - International Economics - - International Finance - - - International Finance Forecasting and Simulation: Models and Applications
    • F44 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Business Cycles

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