Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/284036 
Year of Publication: 
2023
Series/Report no.: 
Staff Report No. 1076
Publisher: 
Federal Reserve Bank of New York, New York, NY
Abstract: 
This paper uses U.S. loan-level credit register data and the 2018-2019 Trade War to test for the effects of international trade uncertainty on domestic credit supply. We exploit cross-sectional heterogeneity in banks' ex-ante exposure to trade uncertainty and find that an increase in trade uncertainty is associated with a contraction in bank lending to all firms irrespective of the uncertainty that the firms face. This baseline result holds for lending at the intensive and extensive margins. We document two channels underlying the estimated credit supply effect: a wait-and-see channel by which exposed banks assess their borrowers as riskier and reduce the maturity of their loans, and a financial frictions channel by which exposed banks facing relatively higher balance sheet constraints contract lending more. The decline in credit supply has real effects: firms that borrow from more exposed banks experience lower debt growth and investment rates. These effects are stronger for firms that are more reliant on bank finance.
Subjects: 
trade uncertainty
bank loans
trade finance
global value chains
trade war
JEL: 
F34
F42
G21
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

Files in This Item:
File
Size
857.51 kB
440.42 kB





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.