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The Role of the Banking System in the International Transmission of Shocks

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Author Info
Massimo Sbracia () (Banca d'Italia)
Andrea Zaghini () (Banca d'Italia)

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Abstract

The paper analyzes the role of the banking system in the international transmission of financial shocks. A channel of transmission is defined as a mechanism through which a financial crisis in one country brings about a financial crisis in another country. Channels involving the banking sector operate through changes in the value of collateral and capital adequacy ratios, through bank runs and bank panics, and through moral hazard. Some stylized facts related to these channels are presented. In particular, the importance of the exposure to a common source of funding and the irrelevance of bank runs as causes of financial distress and contagion are also confirmed by many recent empirical studies. By contrast, according to empirical analyses, the presence of public guarantees as a source of vulnerability to financial shocks is still very controversial. Hence, vulnerability to the common lender channel during the Mexican, Asian and Russian crises is assessed. The indexes proposed in the paper show that the risks stemming from this channel have sharply declined in the years following each crisis for almost all the countries in our sample.

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Paper provided by Bank of Italy, Economic Research Department in its series Temi di discussione (Economic working papers) with number 409.

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Date of creation: Jun 2001
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Handle: RePEc:bdi:wptemi:td_409_01

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Related research
Keywords: nancial crisis; bank run; contagion; regulation;

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Find related papers by JEL classification:
F42 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Policy Coordination and Transmission
G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Mortgages
G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

References listed on IDEAS
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    Other versions:
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    Other versions:
  4. Gorton, Gary, 1985. "Banking theory and free banking history: A Review Essay," Journal of Monetary Economics, Elsevier, vol. 16(2), pages 267-276, September. [Downloadable!] (restricted)
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    Other versions:
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  23. Corsetti, Giancarlo & Pesenti, Paolo & Roubini, Nouriel, 1999. "Paper tigers?: A model of the Asian crisis," European Economic Review, Elsevier, vol. 43(7), pages 1211-1236, June. [Downloadable!] (restricted)
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  27. Charles W. Calomiris & Charles M. Kahn, 1996. "The Efficiency of Self-Regulated Payments Systems: Learning From the Suffolk System," NBER Working Papers 5442, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Panagiotis Staikouras & Christos Staikouras & Maria-Eleni Agoraki, 2007. "The effect of board size and composition on European bank performance," European Journal of Law and Economics, Springer, vol. 23(1), pages 1-27, February. [Downloadable!] (restricted)
  2. Monica Paiella, 2001. "Limited Financial Market Participation: A Transaction Cost-Based Explanation," Temi di discussione (Economic working papers) 415, Bank of Italy, Economic Research Department. [Downloadable!]
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  3. Bruinshoofd,Allard & Candelon,Bertrand & Raabe,Katharina, 2005. "Banking Sector Strength and the Transmission of Currency Crises," Research Memoranda 023, Maastricht : METEOR, Maastricht Research School of Economics of Technology and Organization. [Downloadable!]
    Other versions:
  4. Sergio Rossi, 2004. "Monetary integration strategies and perspectives of new EU countries," International Review of Applied Economics, Taylor and Francis Journals, vol. 18(4), pages 443-469, October. [Downloadable!] (restricted)
  5. Fabio Panetta, 2003. "Evoluzione del sistema bancario e finanziamento dellÂ’economia nel Mezzogiorno," Temi di discussione (Economic working papers) 467, Bank of Italy, Economic Research Department. [Downloadable!]
  6. Michael Chui & Simon Hall & Ashley Taylor, . "Crisis spillovers in emerging market economies: interlinkages, vulnerabilities and investor behaviour," Bank of England working papers 212, Bank of England. [Downloadable!]
  7. Andrea Cipollini & George Kapetanios, 2006. "Forecasting Financial Crises and Contagion in Asia using Dynamic Factor Analysis," Computing in Economics and Finance 2006 477, Society for Computational Economics. [Downloadable!]
    Other versions:
  8. Reiner Eichenberger & Sergio Rossi, 2004. "Die Deregulierung der Zentralbanken: Auf zu einem internationalen Markt für gute Geldpolitik!," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), vol. 140(III), pages 327-353, September. [Downloadable!]
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