Flight Home, Flight Abroad and International Credit Cycles
Posted: 29 Jul 2012
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Flight Home, Flight Abroad and International Credit Cycles
Date Written: July 29, 2012
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 abroad and flight home 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: International Banks, Home bias
JEL Classification: F4, G2
Suggested Citation: Suggested Citation