How do banks propagate economic shocks?
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Title: |
How do banks propagate economic shocks? |
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Number: |
21/24 |
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Author(s): |
Yusuf Emre Akgündüz, Seyit Mümin Cılasun, H. Özlem Dursun-de Neef, Yavuz Selim Hacıhasanoğlu, İbrahim Yarba | |
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Language: |
English |
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Date: |
August 2021 |
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Abstract: |
This paper exploits the COVID-19 pandemic as a negative shock on firm revenues in affected industries and studies the transmission of this shock via banks. We use the ex-ante heterogeneity in the amount of loans issued to affected industries to measure the variation in banks' exposure to the negative shock. Using bank-firm level credit register data from Turkey, we show that banks transmitted the negative shock with a reduction in their loan supply not only to affected but also unaffected industries. The effect persists at the firm level, but is reduced for large firms and firms with existing relationships to state-owned banks. |
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Keywords: |
Bank loan supply, Economic shocks propagation, COVID-19 pandemic, Bank lending channel, Firm borrowing channel |
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JEL Codes: |
G01; G21; G28; G32 |
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