International Shock Transmission after the Lehman Brothers Collapse. Evidence from Syndicated Lending

de Haas, Ralph and van Horen, Neeltje (2012): International Shock Transmission after the Lehman Brothers Collapse. Evidence from Syndicated Lending. Forthcoming in: American Economic Review Papers & Proceedings No. May 2012

Abstract

After Lehman Brothers filed for bankruptcy in September 2008, cross-border bank lending contracted sharply. To explain the severity and variation in this contraction, we analyze detailed data on cross-border syndicated lending by 75 banks to 59 countries. We find that banks that had to write down sub-prime assets, refinance large amounts of long-term debt, and experienced sharp declines in their market-to-book ratio, transmitted these shocks across borders by curtailing their lending abroad. While shocked banks differentiated between countries in much the same way as less constrained banks, they restricted their lending more to small borrowers.

• Item Type: MPRA Paper
• Language: English
• Keywords: Cross-border lending; bank-funding shocks; crisis transmission
• Subjects: E - Macroeconomics and Monetary Economics > E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit > E51 - Money Supply; Credit; Money Multipliers; F - International Economics > F3 - International Finance > F36 - Financial Aspects of Economic Integration; G - Financial Economics > G2 - Financial Institutions and Services > G21 - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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