International Contagion and Loan Supply after Lehman

40 Pages Posted: 12 May 2014

Date Written: May 7, 2014

Abstract

English Abstract: Following the collapse of Lehman Brothers, local lending to French firms by foreign banks experienced a noticeable decline. We use the methodology proposed by Gan (2007) and Khwaja and Mian (2008) to control for borrower heterogeneity and identify the existence of a loan supply shock. We modify the usual specifications to eliminate or limit selection biases. These modifications make it possible to extend the methodology to cases in which the results differ for the intensive margin and the two sides (exits and entries) of the extensive margin.

The decrease in lending by foreign banks remains significant after controlling for domestic banking factors, state intervention and aggregate demand for loans. The conclusion therefore is that the cause of this decline is international financial contagion.

French Abstract: Après la faillite de Lehman Brothers, les banques étrangères établies en France ont réduit leurs crédits aux entreprises. Afin de contrôler l’impact de l’hétérogénéité des emprunteurs et d’identifier un effet d’offre de crédit, nous utilisons la méthodologie proposée par Gan (2007) and Khwaja and Mian (2008). Nous modifions les spécifications habituelles afin d’éliminer ou limiter les biais de sélection. La baisse des crédits accordés par les banques étrangères reste significative après prise en compte des facteurs bancaires internes, des mesures de soutien public et de la demande globale de crédit. Elle reflète donc une contagion financière internationale.

Keywords: International financial contagion, loan supply, bank-firm relationship, credit register, Lehman

JEL Classification: E44, F42, G01, G14, G15, G21

Suggested Citation

Harpedanne de Belleville, Louis-Marie and Harpedanne de Belleville, Louis-Marie, International Contagion and Loan Supply after Lehman (May 7, 2014). Available at SSRN: https://ssrn.com/abstract=2435455 or http://dx.doi.org/10.2139/ssrn.2435455

Louis-Marie Harpedanne de Belleville (Contact Author)

Paris School of Economics (PSE) ( email )

48 Boulevard Jourdan
Paris, 75014 75014
France

Banque de France ( email )

Paris
France

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