Trade Uncertainty and U.S. Bank Lending

53 Pages Posted: 28 Sep 2022

See all articles by Ricardo Correa

Ricardo Correa

Board of Governors of the Federal Reserve System

Julian di Giovanni

Federal Reserve Banks - Federal Reserve Bank of New York; Centre for Economic Policy Research (CEPR)

Linda S. Goldberg

Federal Reserve Bank of New York; National Bureau of Economic Research (NBER)

Camelia Minoiu

Federal Reserve Bank of Atlanta

Date Written: September 21, 2022

Abstract

When trade uncertainty directly affects credit supply it can amplify other contractionary impulses from a deterioration in the international trade environment. Exploiting heterogeneity in banks' ex-ante exposure to trade uncertainty and loan-level data for U.S. banks, we show that an increase in trade uncertainty is associated with credit contractions that impact broad classes of borrowers and go beyond directly-affected firms. Exposed banks are more likely to curtail lending to firms that are internationally oriented, rely on trade finance, and participate in global value chains. The effects are stronger for banks with business models that support global trade and for constrained banks. Moreover, firms that borrow from exposed banks have worse real outcomes. Our results suggest that trade uncertainty can contribute to a fragmentation between banks and international trade, with negative effects for the real economy.

Keywords: Bank loans, trade finance, global value chains, trade uncertainty

JEL Classification: G21, F34, F42

Suggested Citation

Correa, Ricardo and di Giovanni, Julian and Goldberg, Linda S. and Minoiu, Camelia, Trade Uncertainty and U.S. Bank Lending (September 21, 2022). Available at SSRN: https://ssrn.com/abstract=4225203 or http://dx.doi.org/10.2139/ssrn.4225203

Ricardo Correa

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

Julian Di Giovanni

Federal Reserve Banks - Federal Reserve Bank of New York ( email )

33 Liberty Street
New York, NY 10045
United States

HOME PAGE: http://julian.digiovanni.ca

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

HOME PAGE: http://julian.digiovanni.ca

Linda S. Goldberg

Federal Reserve Bank of New York ( email )

33 Liberty Street
New York, NY 10045
United States
212-720-2836 (Phone)
212-720-6831 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Camelia Minoiu (Contact Author)

Federal Reserve Bank of Atlanta ( email )

1000 Peachtree Street N.E.
Atlanta, GA 30309-4470
United States

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