International Spillovers and Local Credit Cycles

Abstract This article studies the transmission of Global Financial Cycle (GFC) to domestic credit market conditions in a large emerging market, Turkey, over 2003–13. We use administrative data covering universe corporate transactions matched bank balance sheets document four facts: (1) an easing global financial leads lower borrowing costs and increase local lending; (2) banks more exposed international capital markets transmit GFC locally; (3) fall currency is larger than foreign due co-movement uncovered interest rate parity (UIP) premium with time; (4) on posted collateral for new loan issuances show that constraints do not relax during boom phase GFC.