Dollar Funding and the Lending Behavior of Global Banks

Dollar Funding and the Lending Behavior of Global Banks. Jeremy Stein, Victoria Ivashina, David Scharfstein, November 2012, Paper. "A large share of dollar-denominated lending is done by non-U.S. banks, particularly European banks. We present a model in which such banks cut dollar lending more than euro lending in response to a shock to their credit quality. Because these banks rely on wholesale dollar funding, while raising more of their euro funding through insured retail deposits, the shock leads to a greater withdrawal of dollar funding. Banks can borrow in euros and swap into dollars to make..." (May require user account or purchase) Link