Nėra lietuvių kalba
Pauline Avril
- 5 November 2025
- WORKING PAPER SERIES - No. 3143Details
- Abstract
- This paper investigates whether geopolitical risk causes a reduction in bank lending. In particular, it focuses on how the increase in geopolitical risk stemming from the Russian invasion of Ukraine affected euro area bank credit supply. Matching granular supervisory and credit register data and using a panel difference-in-difference approach, the results show that banks with larger exposure to the increase in geopolitical risk cut lending significantly more than those with smaller exposure. Banks with greater exposure raised impairments despite exhibiting similar levels of credit distress to their peers, suggesting that the fall in lending was driven by uncertainty. Moreover, firms that were heavily reliant on banks with high exposure to geopolitical risk were unable to fully substitute this shortfall in credit by borrowing more from less affected banks, which significantly constrained firm investment and employment.
- JEL Code
- G1 : Financial Economics→General Financial Markets
G21 : Financial Economics→Financial Institutions and Services→Banks, Depository Institutions, Micro Finance Institutions, Mortgages
E22 : Macroeconomics and Monetary Economics→Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy→Capital, Investment, Capacity