International financial stress spillovers to bank lending: Do internal characteristics matter?

The purpose of this paper is to unveil and assess the potential US financial spillover on Gulf Cooperative Council (GCC) bank lending and to check whether bank's internal characteristics shape such an effect or not. For this purpose, a dynamic panel model is estimated using the GMM system using data on an unbalanced panel of GCC banks over the period 2003-2018. We have found evidence of financial stress spillovers on bank lending and that their distributional impacts vary across time, banks size and capitalization. However, the role of banks liquidity in shaping the impacts of financial stress on lending is found to depend on dry-ups/abundance of market funding liquidity. The results are robust to both splitting the sample into pre- and post- crisis periods as well as to the inclusion of additional potential lending supply determinants.