Institutional Affiliation: University of Glasgow
|International Spillovers and Local Credit Cycles|
with , , : w23149
This paper studies the transmission of the Global Financial Cycle (GFC) to domestic credit market conditions in a large emerging market, Turkey, over the years 2003-13. Matching administrative data covering the universe of corporate loan transactions to bank balance sheets, we document four facts: (1) an easing in global financial conditions leads to lower borrowing costs and an increase in local lending; (2) domestic banks that are more exposed to international capital markets transmit the GFC locally; (3) the fall in borrowing costs is driven by a failure in uncovered interest rate parity (UIP), where the UIP risk premium comoves with the GFC over time; (4) data on posted collateral for new loan issuances show that collateral constraints do not relax during the boom phase of the GFC.
|Capital Flows and the International Credit Channel|
with , , ,
in NBER International Seminar on Macroeconomics 2016, Richard Clarida, Lucrezia Reichlin, and Michael Devereux, organizers
|Sovereign Risk and Bank Lending: Evidence from 1999 Turkish Earthquake|
with : w22335
We investigate the effect of sovereign risk on credit supply, using August 1999 Earthquake as an exogenous shock leading to an increase in Turkey's default risk. Using data on universe of banks between 1997-2012, we show that, banks with higher ex-ante exposures to government bonds suffered a bigger shock to their networth and decreased lending more ex-post. Tracing the impact of an exogenous increase in the sovereign spread to credit supply, the average bank decreases its credit supply by 1.6 percentage points which corresponds to 55 percent of the actual decline in aggregate loan provision in the aftermath of the shock.