Authors: Ricardo Correa, Julian di Giovanni, Linda S. Goldberg, and Camelia Minoiu
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Staff Reports
Trade Uncertainty and U.S. Bank Lending
Number 1076
November 2023
November 2023
JEL classification: F34, F42, G21
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.
AUTHOR DISCLOSURE STATEMENT(S)
Ricardo Correa
I declare that I have no relevant or material financial interests that relate to the research described in this paper. Prior to circulation, this paper was reviewed by the Federal Reserve Board to ensure no violations of the rules applicable to the use of confidential supervisory information and in accordance with the Federal Reserve Bank of New York review policy, available at https://www.newyorkfed.org/research/staff_reports/index.html.
Julian di Giovanni
Julian di Giovanni declares that he has no relevant or material financial interests that relate to the research described in this paper. Prior to circulation, this paper was reviewed in accordance with the Federal Reserve Bank of New York review policy, available at https://www.newyorkfed.org/research/staff_reports/index.html.
Linda S. Goldberg
The author, Linda Goldberg, declares that she has no relevant or material financial interests that relate to the research described in this paper. Prior to circulation, this paper was reviewed in accordance with the Federal Reserve Bank of New York review policy, available at https://www.newyorkfed.org/research/staff_reports/index.html.
Camelia Minoiu
I declare that I have no relevant or material financial interests that relate to the research described in this paper. Prior to circulation, this paper was reviewed in accordance with the Federal Reserve Bank of New York review policy, available at https://www.newyorkfed.org/research/staff_reports/index.html.
I declare that I have no relevant or material financial interests that relate to the research described in this paper. Prior to circulation, this paper was reviewed by the Federal Reserve Board to ensure no violations of the rules applicable to the use of confidential supervisory information and in accordance with the Federal Reserve Bank of New York review policy, available at https://www.newyorkfed.org/research/staff_reports/index.html.
Julian di Giovanni
Julian di Giovanni declares that he has no relevant or material financial interests that relate to the research described in this paper. Prior to circulation, this paper was reviewed in accordance with the Federal Reserve Bank of New York review policy, available at https://www.newyorkfed.org/research/staff_reports/index.html.
Linda S. Goldberg
The author, Linda Goldberg, declares that she has no relevant or material financial interests that relate to the research described in this paper. Prior to circulation, this paper was reviewed in accordance with the Federal Reserve Bank of New York review policy, available at https://www.newyorkfed.org/research/staff_reports/index.html.
Camelia Minoiu
I declare that I have no relevant or material financial interests that relate to the research described in this paper. Prior to circulation, this paper was reviewed in accordance with the Federal Reserve Bank of New York review policy, available at https://www.newyorkfed.org/research/staff_reports/index.html.
Suggested Citation:
Correa, Richard, Julian di Giovanni, Linda S. Goldberg, and Camelia Minoiu. 2023. “Trade Uncertainty and U.S. Bank Lending.” Federal Reserve Bank of New York Staff Reports, no. 1076, November. https://doi.org/10.59576/sr.1076
Correa, Richard, Julian di Giovanni, Linda S. Goldberg, and Camelia Minoiu. 2023. “Trade Uncertainty and U.S. Bank Lending.” Federal Reserve Bank of New York Staff Reports, no. 1076, November. https://doi.org/10.59576/sr.1076
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