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This study examines how bank ownership affects the relationship between credit market fluctuations and short-run economic fluctuations in financially integrated emerging markets. Macroeconomic fluctuations are measured with the deviations of actual growth rates in GDP, consumption and investment from their expected growth rates. A strong linkage between credit market and macroeconomic fluctuations is observed during the period 1997 - 2015. It is found that foreign banks seem to have mitigating effect on GDP volatility when there is credit shortage but have amplifying effect on GDP and consumption volatility in periods with credit abundance. The favorable role of government-owned banks in absorbing short-run fluctuations is observed during local crises and in countries with high level of government effectiveness.