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International Spillovers and Local Credit Cycles

Author

Listed:
  • mehmet ulu

    (Turkish Central Bank)

  • Sebnem Kalemli-Ozcan

    (University of Maryland)

  • Julian di Giovanni

    (Universitat Pompeu Fabra)

  • Yusuf Soner Baskaya

    (Bilkent University)

Abstract

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

Suggested Citation

  • mehmet ulu & Sebnem Kalemli-Ozcan & Julian di Giovanni & Yusuf Soner Baskaya, 2017. "International Spillovers and Local Credit Cycles," 2017 Meeting Papers 1198, Society for Economic Dynamics.
    • Handle: RePEc:red:sed017:1198
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    More about this item

    JEL classification:

    • E0 - Macroeconomics and Monetary Economics - - General
    • F0 - International Economics - - General
    • F1 - International Economics - - Trade

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