Foreign-funded credit: Funding the credit cycle?

Patty Duijm*

*Corresponding author for this work

Research output: Contribution to journalArticleAcademicpeer-review

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Abstract

This study investigates what drives the credit cycle, focusing on the role of foreign-funded bank credit (FFC). Considering credit cycles in 41 countries over the period 1985–2015, this study finds that credit booms are associated with an increase in the share of FFC in an economy. This especially holds for emerging economies and for credit provided to nonfinancial corporations. The increased credit needs during a boom may cause the substitution of domestically funded credit by FFC, as the growth in FFC is less restricted than domestically funded credit, such as the domestic deposit base.

Original languageEnglish
Pages (from-to)167-182
Number of pages16
JournalInternational Finance
Volume25
Issue number2
Early online date22 Mar 2022
DOIs
Publication statusPublished - 1 Aug 2022

Bibliographical note

JEL CLASSIFICATION: F34, F4, G2

Publisher Copyright: © 2022 John Wiley & Sons Ltd.

Funding Information:
I thank, without implicating them, Dirk Schoenmaker, Wolf Wagner, Jakob de Haan, and participants at the RSM Finance Day for useful comments. The usual disclaimer applies. The author received no financial support for the research, authorship, and/or publication of this article.

Publisher Copyright:
© 2022 John Wiley & Sons Ltd.

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