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International Spillovers and Local Credit Cycles

Listed author(s):
  • mehmet ulu

    (Turkish Central Bank)

  • Sebnem Kalemli-Ozcan

    (University of Maryland)

  • Julian di Giovanni

    (Universitat Pompeu Fabra)

  • Yusuf Soner Baskaya

    (Bilkent University)

We show that capital in ows are important drivers of domestic credit cycles using a rm-bank-loan level dataset for a representative emerging market. Instrumenting in ows by changes in global risk appetite (VIX), we nd that a fall in VIX leads to a large decline in real borrowing rates and an expansion in credit supply. Estimates explain 40% of observed cyclical corporate credit growth. The OLS-elasticity of interest rates vis-a-vis capital in ows is smaller than the IV-elasticity. Banks with higher noncore funding oer relatively lower rates to low net worth rms, but do not extend more credit to them given collateral constraints

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File URL: https://economicdynamics.org/meetpapers/2017/paper_1198.pdf
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Paper provided by Society for Economic Dynamics in its series 2017 Meeting Papers with number 1198.

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Date of creation: 2017
Handle: RePEc:red:sed017:1198
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Society for Economic Dynamics Marina Azzimonti Department of Economics Stonybrook University 10 Nicolls Road Stonybrook NY 11790 USA

Web page: http://www.EconomicDynamics.org/
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