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Transmission of Bank Liquidity Shocks in Loan and Deposit Markets: The Role of Interbank Borrowing and Market Monitoring

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Author Info

  • Allen, Franklin

    (University of PA)

  • Hryckiewicz, Aneta

    (University of Frankfurt and Kozminski University)

  • Kowalewski, Oskar

    (University of PA)

  • Tumer-Alkan, Gunseli

    (VU University Amsterdam)

Abstract

We examine the international transmission of bank liquidity shocks from multinational bankholding companies to their subsidiaries. Our findings are consistent with the studies that document that parent bank fragility negatively affects lending by subsidiaries. We further find that reduction in foreign bank lending is stronger for those that are dependent on the interbank market. Moreover, foreign bank lending is determined by different factors in emerging markets and in developed countries. Finally, we show that liquidity needs determine the change in deposits in developing economies, especially during the recent crisis whereas market discipline is relatively more dominant in developed countries.

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Bibliographic Info

Paper provided by University of Pennsylvania, Wharton School, Weiss Center in its series Working Papers with number 10-28.

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Date of creation: Nov 2010
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Handle: RePEc:ecl:upafin:10-28

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Cited by:
  1. Mehdi Mili & Jean-Michel Sahut, 2014. "Bank liquidity shocks in loan and deposit in emerging markets," Working Papers 2014-210, Department of Research, Ipag Business School.
  2. Ralph de Haas & Neeltje van Horen, 2011. "Running for the Exit: International Banks and Crisis Transmission," DNB Working Papers 279, Netherlands Central Bank, Research Department.
  3. Allen, Franklin & Gu, Xian & Kowalewski, Oskar, 2012. "Financial crisis, structure and reform," Journal of Banking & Finance, Elsevier, vol. 36(11), pages 2960-2973.
  4. Hasan, Iftekhar & Jackowicz, Krzysztof & Kowalewski, Oskar & Kozłowski, Łukasz, 2012. "Market Discipline during Crisis: Evidence from Bank Depositors in Transition Countries," MPRA Paper 43693, University Library of Munich, Germany.
  5. Kapan, Tümer & Minoiu, Camelia, 2013. "Balance sheet strength and bank lending during the global financial crisis," Discussion Papers 33/2013, Deutsche Bundesbank, Research Centre.
  6. Allen, Franklin & Jackowicz, Krzysztof & Kowalewski, Oskar, 2013. "The effects of foreign and government ownership on bank lending behavior during a crisis in Central and Eastern Europe," MPRA Paper 48059, University Library of Munich, Germany.
  7. Ugo Albertazzi & Margherita Bottero, 2013. "The procyclicality of foreign bank lending: evidence from the global financial crisis," Temi di discussione (Economic working papers) 926, Bank of Italy, Economic Research and International Relations Area.
  8. Jean-michel Sahut & Medhi Mili, 2014. "Determinants of loans and deposits strategies of foreign bank subsidiaries in emerging countries," Economics Bulletin, AccessEcon, vol. 34(2), pages 695-704.

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