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LIQUIDITY SHOCKS AND THE SUPPLY OF CREDIT AFTER THE 2007–2008 CRISIS
Author(s) -
Kapan Tümer,
Minoiu Camelia
Publication year - 2014
Publication title -
international journal of finance and economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.505
H-Index - 39
eISSN - 1099-1158
pISSN - 1076-9307
DOI - 10.1002/ijfe.1477
Subject(s) - market liquidity , liquidity crisis , liquidity risk , financial system , monetary economics , syndicated loan , economics , vulnerability (computing) , loan , business , funding liquidity , accounting liquidity , sample (material) , financial crisis , credit risk , finance , macroeconomics , chemistry , computer security , chromatography , computer science
We examine the impact of heightened liquidity risk in bank funding markets during the 2007–2008 subprime crisis on the supply of credit to firms internationally. Our sample comprises almost 800 banks lending in the syndicated loan market to borrowers from 48 advanced and emerging market economies. To control for simultaneous changes in demand, we relate within‐borrower changes in bank credit from multiple banks to banks' exposure to liquidity risk. To capture banks' vulnerability to the liquidity shocks that occurred during 2007–2008, we use measures of pre‐crisis reliance on wholesale funding. Our results suggest that banks that were more exposed to liquidity risk during the crisis reduced syndicated lending more than other banks. Our results are robust to alternate measures of vulnerability to liquidity risk, choice of sample period and simultaneous movements in exchange rates. Copyright © 2013 John Wiley & Sons, Ltd.