Second, banks located in a particular country may finance a large share of their locally extended credit to non-banks (ie domestic credit) with net borrowing from non-residents (either from other banks or non-banks). This (2) indirect cross-border credit allows credit growth to outrun domestic deposit growth. This component of international credit is often ignored in empirical analysis of credit booms but, as discussed below, it tends to be large during such periods. Finally, we also examine (3) foreign currencydenominated credit to non-banks, regardless of whether this credit is extended by banks inside or outside the country. As mentioned above, when non-bank borrowers shift their liabilities out of the.
