Cross-Border Debt Flows and Credit Allocation: Firm-Level Evidence from the Euro Area

Daniel Marcel te Kaat*

*Corresponding author for this work

Research output: Contribution to journalArticleAcademicpeer-review

3 Citations (Scopus)
50 Downloads (Pure)


This paper employs euro area firm-level data covering the years 2002–18 to examine the impact of cross-border debt flows on the domestic allocation of credit across firms conditional on their profitability. As only debt flows driven by global push factors are exogenous with respect to domestic credit allocation, I overcome the endogeneity of debt flows by instrumenting them with a measure of global uncertainty (VIX). My results show that debt flows raise the credit growth rates of low performing firms significantly more than those of high performing firms. This result is driven by domestic banking sectors with lower capitalization.
Original languageEnglish
Pages (from-to)1797-1818
Number of pages22
JournalJournal of Money, Credit, and Banking
Issue number7
Early online date31-Jan-2021
Publication statusPublished - Oct-2021

Cite this