Trade Uncertainty and U.S. Bank Lending

Correa, Ricardo; Goldberg, Linda S.; Minoiu, Camelia; di Giovanni, Julian

doi:10.29338/wp2024-16

Working Paper

Trade Uncertainty and U.S. Bank Lending

Abstract: This paper uses U.S. credit register data and the 2018–19 Trade War to study the effects of uncertainty on domestic credit supply. Exploiting differences in banks' ex-ante exposure to trade uncertainty, we find that increased uncertainty is associated with a broad lending contraction across their customer firms. This result is consistent with banks responding to uncertainty with wait-and-see behaviors, where more exposed banks curtail risky exposures, reduce loan maturities, and adjust loan supply along both intensive and extensive margins. The lending contraction is larger for more capital-constrained banks and has significant real effects, especially for bank-dependent firms.

Keywords: uncertainty; bank loans; trade finance; credit supply; trade war;

JEL Classification: F34; F42; G21;

https://doi.org/10.29338/wp2024-16

Status: Published in 2024