TY  - JOUR
AU  - Cesa-Bianchi, Ambrogio
AU  - Ferrero, Andrea
AU  - Rebucci, Alessandro
TI  - International Credit Supply Shocks
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 23841
PY  - 2017
Y2  - September 2017
DO  - 10.3386/w23841
UR  - http://www.nber.org/papers/w23841
L1  - http://www.nber.org/papers/w23841.pdf
N1  - Author contact info:
Ambrogio Cesa-Bianchi
Bank of England
Threadneedle Street
London
EC2R 8AH
E-Mail: ambrogio.cesa-bianchi@bankofengland.co.uk

Andrea Ferrero
University of Oxford
Office 241
Manor Road Building
Manor Road
Oxford OX1 3UQ
United Kingdom
Tel: +44 (0) 1865 281485
Fax: +44 (0) 1865 271094
E-Mail: andrea.ferrero@economics.ox.ac.uk

Alessandro Rebucci
Johns Hopkins Carey Business School
100 International Drive
Baltimore, MD 21202
Tel: 202/251-2106
E-Mail: arebucci@jhu.edu
M1  - published as Ambrogio Cesa-Bianchi, Andrea Ferrero, Alessandro Rebucci. "International Credit Supply Shocks," in Jeffrey Frankel, Hélène Rey, and Charles Engel, organizers, "NBER International Seminar on Macroeconomics 2017" Journal of International Economics (Elsevier), volume 112 (2018)

M3  - presented at "International Seminar on Macroeconomics", June 30 - July 1, 2017
AB  - House prices and exchange rates can potentially amplify the expansionary effect of capital inflows by inflating the value of collateral. We first set up a model of collateralized borrowing in domestic and foreign currency with international financial intermediation in which a change in leverage of global intermediaries leads to an international credit supply increase. In this environment, we illustrate how house price increases and exchange rates appreciations contribute to fueling the boom by inflating the value of collateral. We then document empirically, in a Panel VAR model for 50 advanced and emerging countries estimated with quarterly data from 1985 to 2012, that an increase in the leverage of US Broker-Dealers also leads to an increase in cross-border credit flows, a house price and consumption boom, a real exchange rate appreciation and a current account deterioration consistent with the transmission in the model. Finally, we study the sensitivity of the consumption and asset price response to such a shock and show that country differences are associated with the level of the maximum loan-to-value ratio and the share of foreign currency denominated credit.
ER  -