Follow the Money: Quantifying Domestic Effects of Foreign Bank Shocks in the Great Recession

15 Pages Posted: 24 Feb 2012

See all articles by Nicola Cetorelli

Nicola Cetorelli

Federal Reserve Bank of New York

Linda S. Goldberg

Federal Reserve Bank of New York; National Bureau of Economic Research (NBER)

Multiple version iconThere are 2 versions of this paper

Date Written: February 2012

Abstract

Foreign banks pulled significant funding from their U.S. branches during the Great Recession. We estimate that the average-sized branch experienced a 12 percent net internal fund "withdrawal," with the fund transfer disproportionately bigger for larger branches. This internal shock to the balance sheets of U.S. branches of foreign banks had sizable effects on their lending. On average, for each dollar of funds transferred internally to the parent, branches decreased lending supply by about 40 to 50 cents. However, the extent of the lending effects was very different across branches, depending on their pre-crisis modes of operation in the United States.

Suggested Citation

Cetorelli, Nicola and Goldberg, Linda S., Follow the Money: Quantifying Domestic Effects of Foreign Bank Shocks in the Great Recession (February 2012). NBER Working Paper No. w17873. Available at SSRN: https://ssrn.com/abstract=2010404

Nicola Cetorelli (Contact Author)

Federal Reserve Bank of New York ( email )

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HOME PAGE: http://nyfedeconomists.org/cetorelli/

Linda S. Goldberg

Federal Reserve Bank of New York ( email )

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New York, NY 10045
United States
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212-720-6831 (Fax)

National Bureau of Economic Research (NBER)

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