Flight home, flight abroad, and international credit cycles

M. Giannetti, L. Laeven

Research output: Contribution to journalArticleScientificpeer-review

33 Citations (Scopus)

Abstract

This paper shows that banks exhibit a weaker (stronger) home bias in the extension of new loans when funding conditions in their home country improve (deteriorate). We refer to these changes in home bias as flight abroad and flight home effects, respectively, and show that they are unrelated to the better known flight to quality effect that arises during periods of market turmoil. Our results also indicate that global banks amplify the effect of homegrown shocks on foreign countries while they are a stabilizing factor for the supply of credit in their home countries.
Original languageEnglish
Pages (from-to)219-224
JournalAmerican Economic Review
Volume102
Issue number3
Publication statusPublished - 2012

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