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International Spillovers and Local Credit Cycles

Julian di Giovanni, Sebnem Kalemli-Ozcan, Mehmet Fatih Ulu, Yusuf Soner Baskaya

NBER Working Paper No. 23149
Issued in February 2017, Revised in September 2020
NBER Program(s):Economic Fluctuations and Growth, International Finance and Macroeconomics, Monetary Economics

This paper studies the transmission of the Global Financial Cycle (GFC) to domestic credit market conditions in a large emerging market, Turkey, over 2003–13. We use administrative data covering the universe of corporate credit transactions matched to bank balance sheets to document four facts: (1) an easing in global financial conditions leads to lower borrowing costs and an increase in local lending; (2) domestic banks more exposed to international capital markets transmit the GFC locally; (3) the fall in local currency borrowing costs is larger than foreign currency borrowing costs due to the comovement of the uncovered interest rate parity (UIP) premium with the GFC over time; (4) data on posted collateral for new loan issuances show that collateral constraints do not relax during the boom phase of the GFC.

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Document Object Identifier (DOI): 10.3386/w23149

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