How do Banks Propagate Economic Shocks?

69 Pages Posted: 18 Nov 2021 Last revised: 16 Aug 2023

See all articles by Yusuf Emre Akgunduz

Yusuf Emre Akgunduz

Government of the Republic of Turkey - Central Bank of the Republic of Turkey

Seyit Mumin Cilasun

Government of the Republic of Turkey - Central Bank of the Republic of Turkey

Özlem Dursun-de Neef

Monash Business School - Department of Banking and Finance

Yavuz Hacihasanoglu

Government of the Republic of Turkey - Central Bank of the Republic of Turkey

İbrahim Yarba

Government of the Republic of Turkey - Central Bank of the Republic of Turkey

Date Written: August 16, 2023

Abstract

This paper exploits the COVID-19 pandemic as a negative shock on firm revenues and studies the transmission of this shock across industries via banks. We use the ex-ante heterogeneity in the amount of loans issued to affected industries to measure the variation in banks' exposure to the negative shock. Using bank-firm level credit register data from Turkey, we show that banks transmitted the shock by decreasing their loan supply not only to affected but also to unaffected industries. The effect persists at the firm level, yet lower for large firms and for firms with an existing relationship to state-owned banks.

Keywords: Bank loan supply, Economic shock propagation, COVID-19 pandemic, Bank lending channel, Firm borrowing channel

JEL Classification: G01, G21, G28, G32

Suggested Citation

Akgunduz, Yusuf Emre and Cilasun, Seyit Mumin and Dursun-de Neef, H. Özlem and Hacihasanoglu, Yavuz and Yarba, İbrahim, How do Banks Propagate Economic Shocks? (August 16, 2023). Available at SSRN: https://ssrn.com/abstract=3933697 or http://dx.doi.org/10.2139/ssrn.3933697

Yusuf Emre Akgunduz

Government of the Republic of Turkey - Central Bank of the Republic of Turkey ( email )

Seyit Mumin Cilasun

Government of the Republic of Turkey - Central Bank of the Republic of Turkey ( email )

Istiklal Cad. 10 Ulus
06100 Ankara, Ankara 06050
Turkey

H. Özlem Dursun-de Neef (Contact Author)

Monash Business School - Department of Banking and Finance ( email )

Melbourne
Australia

Yavuz Hacihasanoglu

Government of the Republic of Turkey - Central Bank of the Republic of Turkey ( email )

Istiklal Cad. 10 Ulus
06100 Ankara, Ankara 06050
Turkey

İbrahim Yarba

Government of the Republic of Turkey - Central Bank of the Republic of Turkey ( email )

Istiklal Cad. 10 Ulus
06100 Ankara, Ankara 06050
Turkey

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