Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/246285 
Year of Publication: 
2021
Series/Report no.: 
Working Paper No. 397
Publisher: 
University of Zurich, Department of Economics, Zurich
Abstract: 
After the inception of the euro, the real economy in most member countries remained dependent on credit by domestic banks, which increasingly funded themselves through cross-border interbank funding. We find that this pattern of 'double-decker' banking integration exposed domestic banks to sharp declines in cross-border interbank lending during the eurozone crisis. As a result, domestic banks reduced lending which led to large declines in output in sectors with many small (bank-dependent) firms. We propose a quantitative small open economy model to account for these patterns and conclude that a global banking shock leading to a sudden stop in cross-border interbank lending in the eurozone is required to account for them.
Subjects: 
Small and medium enterprises
sme access to finance
banking integration
domestic bank dependence
interbank dependence
international transmission
eurozone crisis
JEL: 
F30
F36
F40
F45
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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