Working Paper: NBER ID: w18428
Authors: Joonho Hahm; Hyun Song Shin; Kwanho Shin
Abstract: A lending boom is reflected in the composition of bank liabilities when traditional retail deposits (core liabilities) cannot keep pace with asset growth and banks turn to other funding sources (non-core liabilities) to finance their lending. We formulate a model of credit supply as the flip side of a credit risk model where a large stock of non-core liabilities serves as an indicator of the erosion of risk premiums and hence of vulnerability to a crisis. We find supporting empirical evidence in a panel probit study of emerging and developing economies.
Keywords: No keywords provided
JEL Codes: F32; F33; F34
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| noncore bank liabilities increase (G21) | predicted probability of financial crises increase (G01) |
| noncore to core liabilities ratio increase (G32) | financial vulnerability increase (F65) |
| noncore liabilities increase (owed to foreign creditors) (F34) | predicted probability of financial crises increase (G01) |