From Financial Crisis to Great Recession: The Role of Globalized Banks
American Economic Review · 2012 · Volume 102 · Issue 3
Abstract
This paper provides evidence of the role of globalized banks in transmitting financial stresses to the real economy during the global financial crisis. A novel dataset is constructed from quarterly balance sheet reports provided by all UK-resident banks to the Bank of England. I find that the shock to bank funding from non-resident creditors was transmitted domestically through a significant reduction in bank credit supply. Resident subsidiaries and branches of foreign-owned banks reduced lending by a larger amount than domestically-owned banks, while the latter calibrated the reduction in domestic lending more closely to the size of the funding shock.
Keywords
Financial Markets and the Macroeconomy, Banks, Other Depository Institutions, Micro Finance Institutions, Mortgages, Multinational Firms, International Business, International Business Cycles, Financial Crises
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