AbstractThe banking systems of some countries export intermediation services to the rest of the world, while many other countries are net exporters of deposits to banks abroad and net importers of loans from banks abroad. Banking center countries typically have lower inflation, deeper financial ncial systems, earn less gov- ernment revenue from seigniorage, and have lower reserve money relative to bank assets than nonbanking-center countries. This paper develops a stylized model of regulated bank intermediation to examine the role of national monetary policy in determining the international competitiveness of a national banking system. Monetary policy takes the form of controlling the supply of reserve money and imposing restrictions on banks that generate a demand for reserve money (re- serve requirements). The international competitiveness of a banking system is enhanced by having a monetary authority who places greater weight on the in- terests of existing creditors relative to debtors in its constituency, and who has less need to raise revenue from seigniorage. With complete integration of deposit and loan markets the location of intermediation can be indeterminate. Countries that receive more deposits can generate a given amount of seigniorage with less inflation. Monetary authorities in countries that experience deposit outflows may be tempted to impose capital controls in order to maintain their seigniorage base. The analysis suggests why integration of financial markets may be undesirable or infeasible without greater integration of monetary policies.
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Bibliographic InfoPaper provided by Boston University - Department of Economics in its series Papers with number 26.
Length: 27 pages
Date of creation: 1994
Date of revision:
banks ; trade;
Other versions of this item:
- Jonathan Eaton, 1994. "Cross-Border Banking," NBER Working Papers 4686, National Bureau of Economic Research, Inc.
- Jonathan Eaton, 1994. "Cross-Border Banking," Boston University - Institute for Economic Development 42, Boston University, Institute for Economic Development.
- F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
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.:
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- Sul, Wonsik, 2000. "On the performance of the foreign subsidiaries of Korean banks: are securities investments really profitable?," Journal of Asian Economics, Elsevier, vol. 11(2), pages 207-222.
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