Flight Home, Flight Abroad and International Credit Cycles

11 Pages Posted: 10 Nov 2011

See all articles by Mariassunta Giannetti

Mariassunta Giannetti

Stockholm School of Economics; Centre for Economic Policy Research (CEPR); European Corporate Governance Institute (ECGI); Swedish House of Finance

Luc Laeven

European Central Bank (ECB); Centre for Economic Policy Research (CEPR)

Multiple version iconThere are 2 versions of this paper

Date Written: November 9, 2011

Abstract

This paper shows that banks exhibit a weaker (stronger) home bias in the extension of new loans when funding conditions in their home country improve (deteriorate). We refer to these changes in home bias as flight home and flight abroad effects, respectively, and show that they are unrelated to the better known flight to quality effect that arises during periods of market turmoil. Our results also indicate that global banks amplify the effect of home-grown shocks on foreign countries while they are a stabilizing factor for the supply of credit in their home countries.

Keywords: Global banks, Home Bias, International Finacial Transmission

JEL Classification: F4, G2

Suggested Citation

Giannetti, Mariassunta and Laeven, Luc A., Flight Home, Flight Abroad and International Credit Cycles (November 9, 2011). Available at SSRN: https://ssrn.com/abstract=1957362 or http://dx.doi.org/10.2139/ssrn.1957362

Mariassunta Giannetti (Contact Author)

Stockholm School of Economics ( email )

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HOME PAGE: http://sites.google.com/site/mariassuntagiannetti/Home

Centre for Economic Policy Research (CEPR)

London
United Kingdom

European Corporate Governance Institute (ECGI)

c/o ECARES ULB CP 114
B-1050 Brussels
Belgium

HOME PAGE: http://www.ecgi.org

Swedish House of Finance ( email )

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111 60 Stockholm
Sweden

Luc A. Laeven

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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