The Real Effects of Exchange Rate Depreciation: The Role of Bank Loan Supply

55 Pages Posted: 27 May 2022

See all articles by Thorsten Beck

Thorsten Beck

Florence School of Banking and Finance

Peter Bednarek

Deutsche Bundesbank

Daniel te Kaat

University of Groningen

Natalja von Westernhagen

Deutsche Bundesbank

Date Written: April 2022

Abstract

Using matched bank-firm-level data and the 2014 depreciation of the euro, we show that exchange rate depreciations can lead to higher loan supply. Large banks with high net dollar exposure increase lending to export-intensive firms and-through interbank markets-to small banks without foreign-currency asset exposure but with a high share of exporting firms in their portfolio. We also find that German regions with such small banks experience higher output growth following the depreciation. These findings show the importance of banks' balance sheet structure and interbank markets in transmitting exchange rate shocks to the real economy.

Keywords: bank lending, Exchange Rates, Germany, Interbank Markets, Real effects, Regional business cycles

JEL Classification: E44, E52, G21, O40

Suggested Citation

Beck, Thorsten and Bednarek, Peter and te Kaat, Daniel and von Westernhagen, Natalja, The Real Effects of Exchange Rate Depreciation: The Role of Bank Loan Supply (April 2022). CEPR Discussion Paper No. DP17231, Available at SSRN: https://ssrn.com/abstract=4121414

Thorsten Beck (Contact Author)

Florence School of Banking and Finance ( email )

Florence
Italy

Peter Bednarek

Deutsche Bundesbank ( email )

Wilhelm-Epstein-Str. 14
Frankfurt/Main, 60431
Germany
004969 9566-8972 (Phone)

HOME PAGE: http://www.bundesbank.de

Daniel Te Kaat

University of Groningen ( email )

P.O. Box 800
9700 AH Groningen, Groningen 9700 AV
Netherlands

Natalja Von Westernhagen

Deutsche Bundesbank ( email )

Wilhelm-Epstein-Str. 14
Frankfurt/Main, 60431
Germany

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
0
Abstract Views
74
PlumX Metrics