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Countercyclical Foreign Currency Borrowing: Eurozone Firms in 2007-2009
October 15, 2015Macro, Trade, and Finance Seminar Series

Speaker: Ouarda Merrouche is a researcher at University of Lausanne and CEPR. More »

Abstract: Despite international financial disintegration, we document a dramatic increase in dollar borrowing among leveraged Eurozone corporates during the Great Financial Crisis. Using firm-level data, we trace this increase to the twin crisis in the credit market and in funding markets. The reduction in the supply of credit by Eurozone banks caused riskier borrowers to shift to foreign banks, in particular US banks. The coincident rise in the relative cost of euro wholesale funding and the disruptions in the FX swap market caused a rise in dollar borrowing sourced from US banks, especially for firms in export-oriented sectors. Although global bank lending is often reported to amplify the international credit cycle, we show that foreign banking acted as a shock absorber that weathered the real consequences of the credit crunch in Europe.

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Last Updated: Oct 09, 2015

The Macro, Trade, and Finance Seminar Series is a weekly series hosted by the World Bank's research department. The series invites leading researchers from the fields of macroeconomics, growth, trade, international integration, and finance to present the results of their most recent research in a seminar format. The full list of seminars can be viewed here.

Last Updated: Sep 25, 2015

Event Details
  • Date: October 15, 2015
  • Location: MC 10-100
  • Time: 12:30 - 2:00 PM
  • CONTACT: Shweta Mesipam
  • smesipam@worldbank.org

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