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American Economic Review: Vol. 102 No. 3 (May 2012)

AER Volume. 102, Issue 3 | Previous ArticleNext Article

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From Financial Crisis to Great Recession: The Role of Globalized Banks

Article Citation

Aiyar, Shekhar. 2012. "From Financial Crisis to Great Recession: The Role of Globalized Banks." American Economic Review, 102(3): 225-30.

DOI: 10.1257/aer.102.3.225

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.

Article Full-Text Access

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Authors

Aiyar, Shekhar (IMF)

JEL Classifications

E44: Financial Markets and the Macroeconomy
G21: Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
F23: Multinational Firms; International Business
F44: International Business Cycles
G01: Financial Crises