Exchange rate risk, banks' currency mismatches, and credit supply

• 成果类型: Article
• 署名作者: Abbassi, Puriya; Brauning, Falk
• 署名单位: Deutsche Bundesbank; Federal Reserve System - USA; Federal Reserve Bank - Boston
• 刊物名称: JOURNAL OF INTERNATIONAL ECONOMICS
• ISSN/ISSBN: 0022-1996
• DOI: 10.1016/j.jinteco.2023.103725
• 发表日期: 2023
• 关键词: Currency mismatch; Credit supply; Foreign exchange risk; financial intermediation; Risk migration; Financial stability

摘要

We exploit the post-Brexit depreciation of the British pound as an exogenous shock to show how exchange rate shocks transmit to the German real economy through the banking sector. German banks with GBP currency mismatches (between assets and liabilities, including off -balance sheet items) suffer losses when the currency of assets depreciates relative to that of liabilities, which they internalize by cutting back credit supply. For a one percentage-point loss in equity, a bank cuts credit supply by 73 basis points on average, with stronger effects for banks with lower equity capital. The credit contraction of German banks (i) affects also firms that are not directly related to UK conditions, (ii) holds across all industries, including non-tradable sectors, (iii) impacts relatively more small borrowers, and (iv) decreases affected firms' investments. (c) 2023 Elsevier B.V. All rights reserved.