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Transmission of U.S. Financial Shocks to Emerging Market Economies: Evidence from Claims by U.S. Banks

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  • Gab-Je Jo

Abstract

I analyze how U.S. financial shocks and the U.S. business cycle, as well as the business cycles of local economies, can help explain changes in international lending by U.S. banks. I find that during the financial crisis of 2007-8, U.S. financial shocks were transmitted to emerging market economies (EMEs) via the international lending activities of U.S. banks. However, the results suggest that U.S. banks' lending activities alone cannot explain the transmission of the financial shocks to Organization for Economic Cooperation and Development countries. In addition, I find that the U.S. business cycle significantly affected U.S. bank loans to EMEs but that it did not significantly affect the banks' claims on developed countries. I also find that the business cycles in the EMEs were not the main drivers of U.S. banks' cross-border lending; in contrast, the macroeconomic conditions in the developed countries were important drivers of the cross-border lending by the banks.

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  • Gab-Je Jo, 2014. "Transmission of U.S. Financial Shocks to Emerging Market Economies: Evidence from Claims by U.S. Banks," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 50(S1), pages 237-253.
    • Handle: RePEc:mes:emfitr:v:50:y:2014:i:s1:p:237-253
    DOI: 10.2753/REE1540-496X5001S115
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    Cited by:

    1. González-Avella, Juan Carlos & de Quadros, Vanessa Hoffmann & Iglesias, José Roberto, 2016. "Network topology and interbank credit risk," Chaos, Solitons & Fractals, Elsevier, vol. 88(C), pages 235-243.
    2. Berry A. Harahap & Pakasa Bary & Anggita Cinditya M. Kusuma, 2020. "The Determinants of Indonesia’s Business Cycle," Journal of Central Banking Theory and Practice, Central bank of Montenegro, vol. 9(special i), pages 215-235.
    3. Zhang, Dayong & Cai, Jing & Dickinson, David G. & Kutan, Ali M., 2016. "Non-performing loans, moral hazard and regulation of the Chinese commercial banking system," Journal of Banking & Finance, Elsevier, vol. 63(C), pages 48-60.
    4. Mirzaei, Ali & Al-Khouri, Ritab Salem Farhan, 2016. "The resilience of oil-rich economies to the global financial crisis: Evidence from Kuwaiti financial and real sectors," Economic Systems, Elsevier, vol. 40(1), pages 93-108.
    5. Ahmet Sensoy, 2016. "Impact of sovereign rating changes on stock market co-movements: the case of Latin America," Applied Economics, Taylor & Francis Journals, vol. 48(28), pages 2600-2610, June.
    6. Law, Siong Hook & Ng, Chee Hung & Kutan, Ali M. & Law, Zhi Kei, 2021. "Public debt and economic growth in developing countries: Nonlinearity and threshold analysis," Economic Modelling, Elsevier, vol. 98(C), pages 26-40.

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