Board of Governors of the Federal Reserve System (U.S.)
International Finance Discussion Papers
Internal Liquidity Management and Local Credit Provision
This paper studies the patterns of internal liquidity management and their effect on bank lending, using a novel branch-level dataset of Brazilian banks. Our results suggest that internal liquidity management increases during times of financial stress. Privately owned banks are most affected by a liquidity shock, and increase the level of internal funding to maintain their branch lending, while their government-owned competitors react strategically. Private and government banks increase the funding of branches in concentrated and riskier areas. This funding translates into more lending, as the sensitivity of lending to internal funding remains high after the liquidity shock. Altogether, this paper provides branch-level evidence of the way that banks ration internal liquidity, both in normal times and in times of stress, and the effect this has on bank lending.
Cite this item
Nicholas Coleman & Ricardo Correa & Leo Feler & Jason Goldrosen, Internal Liquidity Management and Local Credit Provision, Board of Governors of the Federal Reserve System (U.S.), International Finance Discussion Papers 1204, 01 May 2017.
- F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
- G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
- L21 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Business Objectives of the Firm
- O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
Keywords: Internal liquidity management ; Brazil ; Bank lending
This item with handle RePEc:fip:fedgif:1204
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