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Do foreign-owned banks affect banking system liquidity risk?

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  • Dinger, Valeriya

Abstract

Existing empirical research shows that foreign-owned banks play a stabilizing role in emerging economies' banking systems. Anecdotal evidence suggests that this stabilizing role can be attributed to transnational banks' access to more diversified sources of liquidity. There exists, however, no empirical evidence so far on transnational banks' liquidity behavior and its effect on aggregate banking system liquidity. This paper aims at closing this gap. First, we look at the liquid assets holdings of transnational banks and show that in "normal" times they are significantly lower but in crises times higher than those of single-market banks. Second, we find evidence that transnational banks' presence significantly reduces the risk of aggregate liquidity shortages in emerging economies.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Comparative Economics.

Volume (Year): 37 (2009)
Issue (Month): 4 (December)
Pages: 647-657

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Handle: RePEc:eee:jcecon:v:37:y:2009:i:4:p:647-657

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Web page: http://www.elsevier.com/locate/inca/622864

Related research

Keywords: Foreign bank ownership Financial market integration Liquid assets Bank liquidity crises;

References

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  1. Blundell, R. & Bond, S., 1995. "Initial Conditions and Moment Restrictions in Dynamic Panel Data Models," Economics Papers, Economics Group, Nuffield College, University of Oxford 104, Economics Group, Nuffield College, University of Oxford.
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  5. Bengt Holmstrom & Jean Tirole, 1998. "Private and Public Supply of Liquidity," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 106(1), pages 1-40, February.
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  7. Claeys, Sophie & Hainz, Christa, 2006. "Acquisition versus greenfield: the impact of the mode of foreign bank entry on information and bank lending rates," Working Paper Series, European Central Bank 0653, European Central Bank.
  8. Douglas W. Diamond & Raghuram G. Rajan, 2002. "Liquidity Shortages and Banking Crises," NBER Working Papers 8937, National Bureau of Economic Research, Inc.
  9. Buch, Claudia M. & Lipponer, Alexander, 2007. "FDI versus exports: Evidence from German banks," Journal of Banking & Finance, Elsevier, Elsevier, vol. 31(3), pages 805-826, March.
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Citations

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Cited by:
  1. repec:laf:wpaper:201107 is not listed on IDEAS
  2. Corinne Delechat & Camila Henao Arbelaez & Priscilla S. Muthoora & Svetlana Vtyurina, 2012. "The Determinants of Banks' Liquidity Buffers in Central America," IMF Working Papers, International Monetary Fund 12/301, International Monetary Fund.
  3. Asongu Simplice, 2010. "Post-Crisis Bank Liquidity Risk Management Disclosure," Working Papers, African Governance and Development Institute. 10/002, African Governance and Development Institute., revised 08 Aug 2011.
  4. Ralph De Haas & Yevgeniya Korniyenko & Elena Loukoianova & Alexander Pivovarsky, 2012. "Foreign Banks and the Vienna Initiative: Turning Sinners into Saints?," Mo.Fi.R. Working Papers, Money and Finance Research group (Mo.Fi.R.) - Univ. Politecnica Marche - Dept. Economic and Social Sciences 62, Money and Finance Research group (Mo.Fi.R.) - Univ. Politecnica Marche - Dept. Economic and Social Sciences.
  5. Sophie Brana & Delphine Lahet, 2011. "Foreign banks and the stability of foreign and domestic credit in CEECs," Working Papers, HAL hal-00637686, HAL.
  6. Dana PANCUROVA & Stefan LYOCSA, 2013. "Determinants of Commercial Banks’ Efficiency: Evidence from 11 CEE Countries," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, Charles University Prague, Faculty of Social Sciences, vol. 63(2), pages 152-179, May.
  7. Pistor Katharina, 2012. "Governing Interdependent Financial Systems: Lessons from the Vienna Initiative," Journal of Globalization and Development, De Gruyter, De Gruyter, vol. 2(2), pages 1-25, January.
  8. Ralph De Haas & Yevgeniya Korniyenko & Alexander Pivovarsky & Elena Loukoianova, 2012. "Foreign Banks and the Vienna Initiative," IMF Working Papers, International Monetary Fund 12/117, International Monetary Fund.

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