The euro area crisis and cross-border bank lending to emerging markets

Cross-border bank lending to emerging markets dropped sharply in the second half of 2011 as the euro area crisis intensified. Stefan Avdjiev (BIS), Zsolt Kuti (Magyar Nemzeti Bank) and Előd Takáts (BIS) use the BIS international banking statistics to identify the key drivers of this decline. Their results suggest that the latest contraction in cross-border bank lending was largely linked to the deteriorating health of euro area banks.

JEL classification: F34, G15, G21