The Impact of COVID-19 Pandemic on Bank Lending Around the World

Abstract

We evaluate the influence of the pandemic on global bank lending and identify bank and country characteristics that amplify or weaken the effect of the disease outbreak on bank credit. Using a difference-in-difference methodology and banks from 125 countries, we find that bank lending is weaker in countries more affected by the health crisis. This effect depends on bank financial condition, market structure, regulation and supervision of banking systems, financial intermediary and debt market development, strength of the institutional environment, ease of access of corporate firms to debt capital, and the response of the public health sector to the crisis.

Keywords: Bank loans; credit supply; COVID-19; difference-in-difference; entropy balancing

JEL Classification: G15; G21; G28; G35; F33