Commodity Prices and Bank Lending

27 Pages Posted: 14 May 2020

See all articles by Isha Agarwal

Isha Agarwal

University of British Columbia (UBC) - Sauder School of Business

Rupa Duttagupta

International Monetary Fund

Andrea Presbitero

Johns Hopkins University

Date Written: April 2020

Abstract

We analyze the transmission of changes in commodity prices to bank lending in a large sample of developing countries. A bank‐level analysis shows that a fall in commodity net export prices is associated with a reduction of bank lending, particularly for commodity exporters and during episodes of terms‐of‐trade decline. We complement this analysis with loan‐level data from a credit register, which allows us to identify the effect of a commodity price shock on the supply of credit, controlling for unobserved factors that could drive borrowers' credit demand. Results show that banks with relatively lower deposits and poor asset quality transmit the changes in commodity prices to lending more aggressively.

JEL Classification: F30, F34, G21, Q02

Suggested Citation

Agarwal, Isha and Duttagupta, Rupa and Presbitero, Andrea, Commodity Prices and Bank Lending (April 2020). Economic Inquiry, Vol. 58, Issue 2, pp. 953-979, 2020, Available at SSRN: https://ssrn.com/abstract=3596434 or http://dx.doi.org/10.1111/ecin.12836

Isha Agarwal (Contact Author)

University of British Columbia (UBC) - Sauder School of Business ( email )

2053 Main Mall
Vancouver, BC V6T 1Z2
Canada

Rupa Duttagupta

International Monetary Fund

Kuwait

Andrea Presbitero

Johns Hopkins University ( email )

1740 Massachusetts Avenue, NW
Washington, DC 20036-1984
United States

HOME PAGE: http://https://sites.google.com/site/presbitero/

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