Why Did Public Banks Lend More During the Global Financial Crisis?

IMF Working Papers, June 5, 2020

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During the Global Financial Crisis (GFC), state-owned or public banks lent relatively more than domestic private banks in many countries.
Using a novel bank-level dataset covering 25 emerging market economies, the authors show that public banks lent relatively more during the GFC because they pursued an objective of helping to stabilize the economy.
The analysis finds that this behavior was not driven by public banks having superior fundamentals or access to public or depositors’ funding.
The countercyclical lending behavior of public banks appears to be unique to the GFC rather than a regular characteristic of public banks before and after the GFC.

Bank-level dataset covering 25 emerging market economies.
Focus period: Global Financial Crisis (GFC) and comparison to periods before and after the GFC.
Publication length: 36 pages.
Authors: Joshua Bosshardt, Eugenio M Cerutti.
Publication date: June 5, 2020.