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International Banking and Liquidity Risk Transmission: Evidence from Australia

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  • Rochelle Guttmann
  • David Rodgers

Abstract

This paper examines whether the changes seen at banks in Australia during the financial crisis—specifically, slower growth in domestic and foreign lending, and less net borrowing from international affiliates—can be linked to heightened liquidity risk. Using the IBRN methodology detailed in Buch and Goldberg (2015), which compares cross-sectional differences in these changes to cross-sectional differences in various bank characteristics, it finds no single bank characteristic to be a consistent source of liquidity risk in Australia. There are indications that greater liquid asset shares and deposit funding support lending, but these do not survive various robustness checks. Overall, the paper concludes that developments at banks in Australia during the financial crisis were not driven by cross-sectional differences in vulnerability to liquidity risk. This may be due to the less severe crisis experience in Australia.

Suggested Citation

  • Rochelle Guttmann & David Rodgers, 2015. "International Banking and Liquidity Risk Transmission: Evidence from Australia," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 63(3), pages 411-425, November.
    • Handle: RePEc:pal:imfecr:v:63:y:2015:i:3:p:411-425
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    Cited by:

    1. Holland, Quynh Chau Pham & Liu, Benjamin & Roca, Eduardo & Salisu, Afees A., 2020. "Mortgage asymmetric pricing, cash rate and international funding cost: Australian evidence," International Review of Economics & Finance, Elsevier, vol. 65(C), pages 46-68.
    2. Christine Brown & Viet Do & Oscar Trevarthen, 2017. "Liquidity shock management: Lessons from Australian banks," Australian Journal of Management, Australian School of Business, vol. 42(4), pages 637-652, November.
    3. Quynh Chau Pham Holland & Benjamin Liu & Eduardo Roca, 2019. "International funding cost and heterogeneous mortgage interest-rate pass-through: a bank-level analysis," Empirical Economics, Springer, vol. 57(4), pages 1255-1289, October.
    4. John Nkwoma Inekwe & Yi Jin & Maria Rebecca Valenzuela, 2018. "Global financial network and liquidity risk," Australian Journal of Management, Australian School of Business, vol. 43(4), pages 593-613, November.

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