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Trade shocks, credit reallocation and the role of specialisation: Evidence from syndicated lending

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  • Müller, Isabella

Abstract

This paper provides evidence that banks cut lending to US borrowers as a consequence of a trade shock. This adverse reaction is stronger for banks with higher ex-ante lending to US industries hit by the trade shock. Importantly, I document large heterogeneity in banks' reaction depending on their sectoral specialisation. Banks shield industries in which they are specialised in and at the same time reduce the availability of credit to industries they are not specialised in. The latter is driven by low-capital banks and lending to firms that are themselves hit by the trade shock. Banks' adjustments have adverse real effects.

Suggested Citation

  • Müller, Isabella, 2020. "Trade shocks, credit reallocation and the role of specialisation: Evidence from syndicated lending," IWH Discussion Papers 15/2020, Halle Institute for Economic Research (IWH).
    • Handle: RePEc:zbw:iwhdps:152020
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    More about this item

    Keywords

    trade liberalisation; credit supply; sector specialisation; real effects;
    All these keywords.

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F65 - International Economics - - Economic Impacts of Globalization - - - Finance
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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