Shocks abroad, pain at home? Bank-firm level evidence on financial contagion during the 2007-2009 crisis

Time: 2012, Tuesday March 20th, 13.00-14.00 hours
Location: CPB-office, Van Stolkweg 14, The Hague

Presentation: Neeltje van Horen (DNB)

Discussant:  Michiel Bijlsma (CPB)

Language: English

Registration:  Please register by sending an email to seminars@cpb.nl.

Abstract subject: We identify the contagion through international wholesale liquidity markets and through foreign bank ownership that occurred during the recent financial crisis. Compared to other domestic banks operating in Eastern Europe and Near Asia, internationally-borrowing and foreign banks contract lending more in time, though less so when funded with retail deposits. In contrast most firms that are connected to the internationally-borrowing banks remain unaffected, except for the least capitalized ones. Firms connected to foreign banks perform less, though smaller firms do better. Overall the estimates suggest an interaction between an international bank lending channel and a firm balance-sheet channel operating through the international wholesale liquidity markets and a potent international bank lending channel based on foreign ownership.

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